Japanese Yen, Swiss Franc Drop Sharply as Oil Prices Rally on Escalating U.S.-Iran Conflict

By Renae Dyer

The Japanese yen dropped to a 40-year low against the dollar and the Swiss franc hit a one-year low Thursday as oil prices jumped on growing U.S.-Iran tensions.

Higher oil prices are negative for the yen and franc given Japan and Switzerland's reliance on energy imports. The currencies are also dented by low interest rates in their respective countries as expectations for higher rates elsewhere ramp up in response to inflationary concerns.

"The negative energy price shock and building expectations for European Central Bank and Federal Reserve rate hikes has weighed on both currencies," MUFG Bank currency analyst Lee Hardman said in a note.

The yen's weakness in particular could reignite concerns about potential intervention by Japanese authorities.

The dollar rose to a 40-year high of 163.44 yen in early European trade and reached a one-year high of 0.8156 Swiss francs, according to LSEG data.

Interest rates in Japan are at 1% and at zero in Switzerland, versus 2.25% in the eurozone and a U.S. Fed funds target rate range of 3.50%-3.75%.

The key reason behind the weakness of the yen and franc appears to be their low interest rates and central banks that will be slow to raise rates, ING analyst Chris Turner said in a note.

Japanese authorities seemed to decide against interventions to prop up the currency during the July 20 Marine Day public holiday, which emboldened the market to take the yen lower, Turner said.

Still, intervention remains a risk for investors. Japanese Finance Minister Satsuki Katayama was recently reported as saying that decisive action to tackle yen weakness was possible.

"The absence of any action thus far suggests Japanese authorities are not too alarmed by the pace of the latest slide, though that doesn't mean that intervention isn't possible," said Raffi Boyadjian, market analyst at XM.

For some investors, selling the franc could therefore make more sense than selling the yen.

"Dollar-franc rather than dollar-yen could become an increasingly popular vehicle for these summer months; the Swiss National Bank is not going to surprise with $70 billion of FX intervention (as the Bank of Japan did in April/May)," ING's Turner said.

In fact, the SNB probably welcomes a weaker franc and is likely to be one of the last central banks to raise rates, he said.

Concerns about the Iran war have mounted with the U.S. and Iran exchanging strikes and no signs of the conflict abating. The Wall Street Journal reported that the U.S. is surging forces, medics and weaponry to the Middle East as President Trump considers expanding the conflict.

Brent crude rose to a seven-week high of $98.88 per barrel in European trade, LSEG data showed.

-Write to Renae Dyer at renae.dyer@wsj.com

(END) Dow Jones Newswires

July 23, 2026 06:55 ET (10:55 GMT)