Yen spikes briefly and reported Iran escalation boosts dollar

LONDON - The yen jumped sharply against the dollar on Monday, prompting renewed speculation about intervention by Japanese authorities, while the dollar rose after Iranian reports of an incident involving a U.S. warship in the Gulf of Oman.

The yen climbed by as much as 0.75% to 155.69 before unwinding, with much of the appreciation taking place during a nine-minute stretch around midday Singapore time (0400 GMT).

The Japanese currency was last little changed on the day at 157.12, after rising about 1.5% last week, its largest weekly jump since February. It remained slightly stronger against the euro and pound.

Ministry of Finance officials did not immediately respond to requests for comment after the move on Monday.

ANALYSTS SAY THE CASE TO INTERVENE IS STRONG

"The case for intervention is strong, given the inflationary impact of a weaker yen via import prices, a U.S. administration broadly comfortable with such action, and Japan's ample FX reserves," said Roberto Cobo Garcia, head of G10 FX strategy at BBVA.

"We expect intervention to remain effective in capping dollar-yen below 160, as in 2024, with the Ministry of Finance likely to defend this level if tested again in the coming weeks."

Tokyo officials declined to confirm whether they had intervened last week, but sources told Reuters the authorities had bought yen for the first time in two years.

Money market data on Friday showed Tokyo may have spent as much as 5.48 trillion yen ($35 billion) buying the currency.

IRAN WAR STILL IN FOCUS

Markets remained cautious at the start of the trading week after Iranian news agency Fars reported that two missiles had hit a U.S. warship near Jask on the Gulf of Oman after it ignored Iranian warnings about entering the Strait of Hormuz, prompting it to turn back.

U.S. Central Command denied the reports, saying no U.S. Navy ships had been struck in the Strait of Hormuz.

The U.S. dollar edged higher after the reports. It has tended to benefit when tensions between Iran and the U.S. have flared, given its status as a safe haven and the limited exposure of the U.S. to imported energy-price inflation.

The dollar index, which measures the U.S. dollar's strength against a basket of six currencies, was up 0.2% at 98.379.

The euro was down 0.2% at $1.1701 after German Chancellor Friedrich Merz sought to downplay a rift with Trump after the U.S. announced plans to draw down troops from Germany.

The country's economy ministry said on Sunday that Berlin is also in touch with the European Commission as it holds talks with Washington, after Trump said on Friday he would increase tariffs on cars and trucks from the EU to 25%.

"In the grand scheme of things, it (auto tariffs) is definitely not a positive, but it's not going to be the main driver," SEB FX strategist Amanda Sundström said.

"The situation in the Middle East is definitely the dominant factor now. If that reaches some de-escalation or more stable situation, that's going to be positive for the euro."

The British pound was down 0.3% at $1.3539. British markets are closed on Monday for a public holiday.

The Australian dollar was down 0.3% at $0.7181, while its New Zealand counterpart dipped 0.1% to $0.5888.

The Reserve Bank of Australia is due to announce its next policy decision on Tuesday, with the majority of analysts polled by Reuters expecting a hike in the cash rate to 4.35%.

Last week, Australia's two biggest grocers warned of growing price pressures as the Iran war drives up fuel and raw material costs for suppliers.

Bitcoin was little changed at $79,044, after earlier trading above $80,000 for the first time since January 31.

(Reporting by Samuel Indyk and Gregor Stuart Hunter; Editing by Muralikumar Anantharaman, Toby Chopra and Barbara Lewis)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published May 4, 2026 at 5:44 AM.