USD/JPY traded near 159.60 in early Asian hours on Friday and stayed flat. Trading may be thin due to the Good Friday holiday, with focus on the US March Nonfarm Payrolls report due later on Friday.
Tensions in the Middle East lifted oil prices and supported the US Dollar against the Yen. A military strike destroyed a bridge near Tehran, and Donald Trump urged Iran to make a deal.
Middle East Tensions Support The Dollar
Iran’s foreign minister, Abbas Araghchi, said recent US strikes on civilian infrastructure would not make Iran back down. He said such actions “convey the defeat and moral collapse of an enemy in disarray.”
US tariff plans may limit further US Dollar gains. The Trump administration plans tariffs of up to 100% on some imported medicines from firms that do not reach deals with the administration in coming months, according to Bloomberg.
The White House said the levy would apply to patented drugs made in countries without tariff deals with the US. It would apply to companies that do not have most-favoured-nation-pricing agreements with the administration.
Japanese officials also warned about Yen weakness. Atsushi Mimura said authorities may take “decisive” steps if speculative moves continue, and the BoJ has warned it may adjust policy if Yen weakness persists.
Options Strategies And Event Risk
With USD/JPY hovering just under the critical 160.00 level, we see significant two-way risk in the coming weeks. The tension between Middle East conflicts supporting the dollar and the threat of Japanese intervention creates an unstable environment. This makes buying USD/JPY put options a prudent way to hedge existing long positions against a sudden, sharp reversal.
The warnings from Japanese authorities should not be taken lightly, especially at these levels. We only have to look back to the fall of 2022, a period we analyzed extensively in 2025, when the Ministry of Finance spent over $60 billion to defend the yen as it weakened past 150. The current price of 159.60 makes the probability of a similar, or even larger, intervention extremely high.
All attention today, April 3rd, is on the US Nonfarm Payrolls report, which adds another layer of uncertainty. With consensus estimates for March at around 190,000 jobs, any significant deviation could trigger a multi-yen move in the pair. A long straddle options strategy could be used to profit from the expected explosion in volatility, regardless of the direction.
The rise in oil prices, with WTI crude pushing towards $90 a barrel on the back of the Iran news, continues to provide a floor for the dollar. However, the chaos surrounding potential US tariffs on medicines could suddenly undermine dollar strength without warning. This conflict reinforces the case for using derivatives to define risk rather than trading the spot currency directly.
