The U.S. and Japan confirmed Monday they had collaborated to support the Japanese yen, leading to a significant rise in the currency's value against the U.S. dollar. The yen reached its highest point against the dollar since late last year, trading as low as 155.20. This intervention followed a period where the yen had weakened to near 164 per dollar.
This move by the U.S. and Japan aims to curb the dollar's appreciation, which had reached 40-year highs against the yen. While a weaker yen can boost profits for Japanese companies with international operations and attract tourists, it also increases the cost of imports, impacting the broader economy.
In parallel, oil prices experienced a sharp decline. U.S. President Donald Trump indicated that U.S. forces would hold back from attacks against Iran, citing proximity to a deal to end hostilities in the Middle East. This development contributed to a roughly 5% drop in oil prices. U.S. benchmark crude fell to $80.58 per barrel, and Brent crude decreased to $83.87 per barrel.
Asian stock markets showed mixed performance in early trading. Japan's Nikkei 225 index lost 1.9%, while South Korea's Kospi dropped 4.5% after a substantial surge on Friday. Hong Kong's Hang Seng index gained 0.6%, and the Shanghai Composite index declined by 0.5%. In Australia, the S&P/ASX 200 slipped 0.2%, while Taiwan's Taiex saw a gain of 0.7%.
In the U.S., stock markets had closed higher on Friday, concluding a volatile July. The S&P 500 rose 0.7%, and the Dow Jones Industrial Average added 0.5%. The Nasdaq composite rallied 1%. Market fluctuations in the U.S. have been influenced by rising oil prices due to the conflict with Iran and concerns about the profitability of significant investments in artificial intelligence technology by major tech firms and chipmakers.
Amazon's stock surged 15.3% on Friday after reporting a more than threefold increase in profit for the latest quarter, partly attributed to growth in its cloud computing business. Analysts view this as a potential indicator that Amazon's AI investments are yielding results. Microsoft also saw a significant stock increase the previous day, driven by similar signals regarding its AI investments.
However, the performance of chip companies, which supply essential components for AI, has been erratic. Micron Technology, for instance, experienced sharp swings before ultimately closing with a loss. Apple's stock dropped 7.4% despite exceeding profit expectations, as its revenue growth forecast fell short, attributed by executives to a supply chain crunch for components needed in the AI boom.