Iran's Asks Japan to Pay for Oil in Yen, Putting a Dent into Carry Trades

The Japanese Yen rebounded today following news that Iran wants Japan to start paying for its oil in Yen. This announcement is more important symbolically than economically because Japan only imports $10 billion worth of oil per year.

In a market that trades over $2 trillion a day, this should hardly put a dent into the market?s overall demand for Yen. Furthermore, Iran is running out of oil, having only recently imposed fuel rations. Symbolically this is important however because it shows that many nations are concerned about the imported inflation that the weakness of the dollar has brought to their own countries. Just yesterday, Kuwait announced that it was going to allow the dinar to appreciate by 0.4 percent in order to lower inflationary pressures. Surprises like these are the only things that have the potential to drive the Yen higher these days. BoJ Governor Fukui?s failure to signal an August rate hike has kept carry trades steady. Japanese markets are closed on Monday. The economic calendar is extremely light in the week ahead.