The Japanese yen weakened in Asian trading on Monday against a basket of major and minor currencies, resuming losses that were briefly interrupted on Friday against the US dollar. The currency is once again approaching a two-year low as Japanese authorities continue to stress their readiness to intervene in the foreign exchange market to protect the yen from excessive volatility.

The US dollar continues to receive strong support from investors seeking the most attractive available investment opportunities following the Federal Reserve's hawkish meeting last week. This has overshadowed the negative impact of declining safe-haven demand after the conclusion of the first round of US-Iran negotiations in Switzerland, which resulted in a 60-day roadmap aimed at reaching a final agreement between the two sides.

The Price

• Japanese yen exchange rate today: The dollar rose 0.25% against the yen to ¥161.61, from an opening level of ¥161.22. The session low was recorded at ¥161.22.

• The yen ended Friday up 0.1% against the dollar, its first gain in six sessions, as part of a recovery from a two-year low of ¥161.81.

• The yen lost 0.7% against the dollar last week, marking its third weekly decline in a month, as US Treasury yields rose following the Federal Reserve meeting.

Japanese authorities

Japanese authorities are closely monitoring movements in the currency market as the yen approaches its weakest levels in 40 years after moving beyond the key ¥160-per-dollar threshold. The level is widely viewed as a red line that could prompt renewed intervention to support the currency.

Sources told Reuters that Tokyo intervened several times in late April and early May to halt the yen's decline. At the time, the exchange rate reached ¥160.72 per US dollar, its weakest level since July 2024.

Japanese Finance Minister Satsuki Katayama said during her latest press conference on Monday that authorities are fully prepared to take decisive action and intervene directly in the foreign exchange market at any time to protect the yen from speculative movements.

Katayama stressed that the ministry's position remains unchanged, stating: "We will respond appropriately and directly to foreign exchange market fluctuations whenever necessary." She deliberately refrained from identifying a specific exchange rate as a trigger for intervention, as part of a strategy of constructive ambiguity designed to deter speculators.

Views and analysis

Matt Simpson, Senior Market Analyst at StoneX, said: "Japan's Ministry of Finance may be concerned about the US dollar rising against the yen to its highest level of 2024."

Simpson added: "It may also feel powerless to do much about it, as intervening against the backdrop of a hawkish Federal Reserve and strong US economic data could prove both costly and ineffective."

Japanese interest rates

• The Bank of Japan raised its benchmark interest rate by 25 basis points last week to 1.0%, the highest level since 1995, marking another historic step in the normalization of monetary policy in the world's fourth-largest economy.

• Bank of Japan Deputy Governor Ryozo Himino said on Friday that inflation could exceed the central bank's 2% target and warned about the cost of delaying rate hikes, reaffirming the bank's intention to continue raising borrowing costs.

• Economic surveys indicate that the most likely baseline scenario is for the Bank of Japan to deliver an additional 25-basis-point rate increase in December.

• Market pricing for a quarter-point rate hike at the Bank of Japan's July meeting currently remains below 25%.

• Investors are awaiting additional inflation, unemployment, and wage data from Japan to reassess those expectations.

US dollar

The US Dollar Index rose 0.15% on Monday, resuming gains that paused on Friday and moving back toward a 13-month high, reflecting continued strength in the US currency against a basket of global currencies.

The advance is being driven by demand for the dollar as the most attractive available investment, particularly after the Federal Reserve's latest meeting, which was more hawkish than markets had anticipated and significantly strengthened expectations for at least one US interest rate hike this year.

That has outweighed the negative impact of fading safe-haven demand following the conclusion of the first round of US-Iran negotiations in Switzerland, which produced a 60-day roadmap aimed at reaching a final agreement between the two countries.

US-Iran negotiations

• The first round of US-Iran negotiations in Switzerland concluded in what was described as a "positive and constructive" atmosphere despite the tensions and mutual threats that preceded the talks.

• The high-level discussions ended early Monday, with technical meetings scheduled to resume later this week.

• Mediators, Qatar and Pakistan, announced that both sides had agreed on a roadmap toward a final agreement within 60 days, representing the most significant diplomatic progress in months.

• The parties also agreed to establish a high-level committee to oversee future negotiations, along with a permanent communication mechanism aimed at preventing further escalation.

Bitcoin continued to trade sideways below the $63,000 level on Friday following Thursday's decline. The BTC/USD pair remains confined within a mildly descending channel on the 60-minute chart.

The world's largest cryptocurrency fell below its 100-hour moving average by several levels, although it managed to stage a modest rebound, helping it avoid entering oversold territory according to the 14-hour Relative Strength Index (RSI).

From a fundamental perspective, BTC/USD is trading during a relatively active period for US markets. Initial jobless claims released on Thursday came in slightly above expectations at 226,000 compared with forecasts of 225,000, though they declined from the previous week's reading of 230,000.

Economic data

The Philadelphia Fed Manufacturing Index for June also exceeded expectations, coming in at 10.3 points compared with forecasts of 10.0 points, after registering -0.4 points in the previous month.

In other economic data, May retail sales surpassed expectations, rising 0.9% month-over-month compared with forecasts of 0.5%. Core retail sales, excluding automobiles, increased 0.8%, also beating expectations of 0.5%.

Pending home sales likewise came in stronger than expected, rising 3.8% on a monthly basis compared with forecasts of 0.8%.

Earlier in the week, US building permits for May came in below expectations at 1.413 million, versus forecasts of 1.420 million, and down from 1.423 million in April.

Housing starts also missed expectations, registering 1.177 million units compared with forecasts of 1.430 million and down from 1.392 million in the previous month.

From a technical perspective, Bitcoin remains within a descending channel on the 60-minute chart, although the 14-hour RSI has recently rebounded, helping the market avoid slipping into oversold conditions.

As a result, buyers may attempt to extend the current rebound toward the $64,493 level, with a further upside target at $66,796.

On the downside, sellers may look to take profits near $60,564, or push the price lower toward the $58,125 level.

Hawkish policy and potential rate hike

The Federal Reserve left interest rates unchanged within a range of 3.50% to 3.75% at its first meeting under new Chairman Kevin Warsh, who began his tenure with a broad review of policy. Nearly half of Fed policymakers now expect interest rates to rise this year as inflation concerns continue to intensify.

According to data from the London Stock Exchange Group, the federal funds futures market is now fully pricing in an interest rate increase by October. Strong retail sales data has further reinforced expectations that monetary tightening will continue.

The US Dollar Index, which tracks the performance of the US currency against a basket of peers including the yen, euro, and British pound, slipped 0.1% to 100.7 points, remaining near its highest level since May 2025.

Brent crude prices were on track to post a weekly decline of 9% on Friday as traders assessed diminishing prospects for a lasting truce between the United States and Iran after talks were canceled and Israel intensified its attacks in Lebanon.

Brent crude futures fell by 24 cents, or 0.3%, to $79.61 per barrel by 11:00 GMT, putting the benchmark on course for a second consecutive weekly decline.

Switzerland said that talks between US officials and Iranian negotiators aimed at reaching an agreement to end the Middle East conflict would not take place on Friday. At the same time, US Vice President JD Vance canceled his travel plans, adding to uncertainty over the prospects for a permanent ceasefire.

Tamas Varga, an analyst at PVM Oil Associates, said: "This highlights the difficult road ahead in achieving a full and sustained resumption of oil flows through the Strait of Hormuz." He added: "Headlines related to an extended ceasefire agreement will undoubtedly continue to influence market sentiment."

Both benchmark crude contracts hit their lowest levels since the early days of the conflict on Thursday after several oil tankers, including three Saudi-flagged vessels carrying a combined 6 million barrels of crude, passed through the strait just hours after the US and Iranian presidents signed a temporary agreement to end the war.

Analysts expect the agreement to return more than 85 million barrels of oil currently stranded in the Gulf region to global markets. The deal also includes the removal of US sanctions on Iranian oil, which would add further supplies to the market.

Around 20% of global oil and liquefied natural gas supplies pass through the Strait of Hormuz. However, the recovery of flows and production following the US-Iran agreement could take several months.

Citigroup said its base-case scenario, with a 60% probability, assumes a continued normalization of oil flows, leading to a market surplus and lower prices over the next six to twelve months, with crude potentially falling to around $60-$65 per barrel by the first quarter of 2027.

Commerzbank said oil supplies are expected to recover gradually and lowered its year-end Brent forecast to $80 per barrel from $85 previously. However, it still expects prices to remain above pre-war levels for most of next year.

Iraqi Oil Minister Bassem Mohammed said Iraqi oil fields are ready to resume production and that output will gradually return to its previous normal levels.

On the demand side, OPEC said in its 2026 Annual World Oil Outlook that global oil demand is expected to rise to 113.3 million barrels per day by 2030, up from 105.1 million barrels per day in 2025.

However, Israel's continued military campaign against Hezbollah in Lebanon has raised questions about the durability of the peace agreement between the United States and Iran.

The US dollar climbed to its highest level in more than a year on Thursday after the Federal Reserve's decision to keep interest rates unchanged while adopting a hawkish tone fueled expectations for further rate increases. Although the dollar edged lower today, it remains close to that peak.

The US central bank left interest rates unchanged within a range of 3.50% to 3.75% at its first meeting under new Federal Reserve Chairman Kevin Warsh, who began his tenure with a broad policy review. Nearly half of Fed policymakers now expect interest rates to rise this year as concerns over inflation continue to grow.

According to data from the London Stock Exchange Group, the federal funds futures market is now fully pricing in an interest rate hike by October. Strong retail sales data has further reinforced expectations that monetary tightening will continue.

The US Dollar Index, which measures the currency against a basket of major peers including the yen, euro, and British pound, slipped 0.1% to 100.7 points. Despite the decline, the index remains near its highest level since May 2025.

Lee Hardman, Senior Currency Analyst at Mitsubishi UFJ Financial Group, said that "the Federal Reserve's hawkish policy update threatens to trigger a powerful rally in the US dollar."

He added that "the dollar has benefited from the sharp upward revision in short-term US interest rate expectations, more than offsetting the negative impact of the US-Iran agreement announced over the weekend."

Japanese yen

The Japanese yen weakened beyond the ¥161-per-dollar level late on Thursday, approaching its weakest point in four decades and reviving speculation that Tokyo could intervene again to support the currency.

After Japanese equity markets closed on Thursday, the yen fell sharply through the ¥161 level before extending losses later in the day to ¥161.80 per dollar, its weakest level since July 2024.

A move beyond ¥161.96 per dollar would push the yen to its weakest level since 1986.

Market speculation

The currency's decline prompted fresh warnings from Japanese financial officials. Reports indicated that Japanese Finance Minister Satsuki Katayama told a recent G7 meeting that Japan is "prepared to take decisive action against speculative movements" in foreign exchange markets.

The yen remains under pressure despite more than $70 billion in intervention by Japan's Ministry of Finance in May and recent interest rate hikes by the Bank of Japan, which have pushed borrowing costs to their highest level since 1995.

According to reports, Bank of Japan Deputy Governor Ryozo Himino told parliament that the central bank is closely monitoring currency movements because of their impact on the economy and inflation.

Analysts told CNBC that intervention efforts in the foreign exchange market have not been particularly effective in curbing yen weakness because the underlying drivers are structural in nature.

These factors include elevated US Treasury yields, which continue to support the dollar, as well as the pro-growth policies pursued by Japanese Prime Minister Sanae Takaichi's administration, which has signaled a preference for maintaining relatively accommodative monetary conditions.

While yen weakness has helped support Japan's exports and economic growth, it has also raised concerns about imported inflation and the erosion of household purchasing power.