The Japanese yen weakened against a basket of major and minor currencies during Asian trading on Tuesday, extending its losses for a second consecutive session against the US dollar and falling to its lowest level since 1986. The move has fueled speculation that Japanese authorities may intervene in the foreign exchange market to defend the currency against excessive volatility.

Finance Minister Satsuki Katayama said the government remains prepared to take appropriate action against excessive exchange-rate fluctuations. Meanwhile, Chief Cabinet Secretary Minoru Kihara stated that Japan would continue efforts to build an economy that is less vulnerable to currency swings.

The Price

• USD/JPY rose 0.3% to ¥162.40, its highest level since December 1986, up from an opening level of ¥161.93. The pair touched an intraday low of ¥161.85.

• The yen ended Monday down 0.15% against the US dollar, marking its fifth loss in the last six sessions, as concerns over the widening interest-rate gap between Japan and the United States continued to weigh on the currency.

Monthly performance

• For June, which concludes officially at today’s settlement, the Japanese yen is down around 2.0% against the US dollar and is on track for a second consecutive monthly decline, as well as its largest monthly loss since October 2025.

• The monthly weakness reflects strong investor demand for the US dollar following the hawkish Federal Reserve meeting under its new chairman, Kevin Warsh.

• Rising expectations for additional Federal Reserve rate hikes this year have renewed concerns about the widening yield differential between the United States and Japan in favor of the dollar.

Japanese authorities

Japanese Finance Minister Satsuki Katayama said on Tuesday that the government stands ready to take appropriate measures against excessive currency volatility.

“That includes decisive action, as agreed between Japan and the United States,” Katayama said.

Chief Cabinet Secretary Minoru Kihara also told reporters that the government would continue efforts to reduce the economy’s exposure to exchange-rate fluctuations while remaining ready to intervene in currency markets when necessary. He declined to comment directly on the current level of the yen.

Views and analysis

• Julia Wang, Chief Investment Officer for North Asia at Nomura, said Japan could intervene in the foreign exchange market following the yen’s slide to multi-decade lows, although she expects any broader market impact to be short-lived.

• Wang added that while intervention is not officially tied to any specific exchange-rate level, a new cycle low for the yen could increase domestic concerns about currency weakness and raise the likelihood of official action.

• She noted that the broader outlook for the yen remains weak because large interest-rate and real-yield differentials between Japan and the United States continue to favor carry trades, where investors borrow cheaply in yen and invest in higher-yielding assets elsewhere.

• Matt Simpson, Senior Market Analyst at StoneX, said Japan’s Ministry of Finance would intervene if it could, but it faces a difficult challenge while moving against the tide of a hawkish Federal Reserve.

• Simpson added that if US economic data delivers a surprise in favor of monetary easing later this week, Japanese authorities could seize the opportunity to intervene more aggressively while the dollar is under pressure. Until then, intervention threats are likely to remain largely verbal.

Japanese interest rates

• Market pricing for a 25-basis-point rate increase by the Bank of Japan at its July meeting remains below 25%.

• Investors are awaiting additional inflation, labor market, and wage data from Japan that could force a reassessment of those expectations.

XRP pared some of its recent losses and traded near the $1.05 level at the time of writing on Monday, as the cross-border payments token attempted to recover from last week’s selloff, which intensified during the exchange of military strikes between the United States and Iran.

Federal Reserve and jobs report in focus

The US Federal Reserve left interest rates unchanged this month, but policymakers continue to signal that rates could move higher later this year amid concerns that inflation may remain above the central bank’s 2% target.

Investors are now awaiting ADP employment data on Wednesday and the US nonfarm payrolls report on Thursday for additional clues about the Federal Reserve’s policy outlook.

Traders currently see roughly a 60% probability of a rate hike by September.

A sustained move above the $1.05 level could help confirm a shift back toward a bullish trend, particularly as Bitcoin and Ethereum, the two largest cryptocurrencies, are also attempting to move higher.

Modest investment inflows support XRP

Spot XRP exchange-traded funds recorded net inflows on several days last week.

According to SoSoValue data, inflows into US-listed spot XRP ETFs nearly doubled to $23 million, compared with roughly $11 million the previous week.

Cumulative net inflows now stand at $1.47 billion, up from $1.45 billion a week earlier, while assets under management declined to $934 million from $995 million.

XRP still needs stronger institutional demand to offset the significant weakness in retail investor activity.

Data from CoinGlass showed that open interest in XRP perpetual futures remained relatively stable at $2.36 billion, compared with $2.69 billion on June 1.

Compared with the record high of $10.94 billion reached in July, current open-interest levels suggest that caution and risk aversion continue to dominate retail investor sentiment.

A return of retail participation remains a key requirement for XRP to resume a sustained bullish trend.

Oil prices moved higher on Monday after the United States and Iran reached an agreement to halt recent hostilities in the Middle East.

US West Texas Intermediate crude futures climbed 2.4% to $70.85 a barrel. WTI had closed below the $70 level on Friday for the first time since February 27, one day before the outbreak of the Iran-Israel war.

Meanwhile, Brent crude futures, the global benchmark, gained 1.7% to $73.20 a barrel.

The gains came after a series of clashes between the United States and Iran threatened to derail negotiations aimed at ending the conflict. US officials said both sides had agreed to cease hostilities and allow commercial vessels to move freely through the strategically important Strait of Hormuz.

“Technical talks covering all aspects of the memorandum of understanding are expected to continue,” a US official told CNBC on Sunday.

“For now, both sides will stop escalating, and ships can move freely,” the official added.

Fresh attacks raise concerns over energy supplies

The US military launched strikes on several Iranian targets after reports emerged that a commercial tanker in the Strait of Hormuz had been hit by a projectile on Saturday.

Neighboring Gulf states Bahrain and Kuwait also reported detecting incoming missiles and drones overnight.

The renewed violence prompted US President Donald Trump to issue a warning to Iran on Sunday.

“US aircraft have just struck Iranian missile and drone storage facilities and coastal radar sites because Iran once again violated the ceasefire agreement,” Trump wrote on Truth Social.

“There may come a point when we can no longer remain reasonable and will be forced to finish militarily the mission we began so successfully. If that happens, the Islamic Republic of Iran will cease to exist.”

US Central Command said early Sunday that its fighter jets had targeted 10 Iranian military sites in and around the Strait of Hormuz in response to a drone attack on the Panama-flagged tanker MT Keiko.

According to the military, the vessel was carrying more than two million barrels of crude oil while transiting the strait.

Analysts warn of excessive optimism

Energy strategists at ING warned that oil market participants may be underestimating the risks surrounding the pace of supply recovery from the Gulf region.

Warren Patterson and Ewa Manthey said in a research note published Monday that developments over the weekend reinforced the fact that significant risks remain in the oil market.

“Despite this, market participants appear to be looking through these events and focusing instead on what continued improvements in oil flows mean for the global supply-demand balance,” the analysts said.

“That optimism looks misplaced and leaves considerable upside risk if supply recovery proves slower than expected or if we see another meaningful escalation.”

They added that although oil remains technically in oversold territory, market momentum still appears tilted to the downside.

As OPEC raised its long-term oil demand forecast for the third consecutive year, now expecting global consumption to increase by 19 million barrels per day, or 18%, by 2050, Libya’s National Oil Corporation announced that the country’s crude production had reached its highest level in 13 years.

Libya is currently producing around 1.487 million barrels of crude oil per day, just shy of the National Oil Corporation’s near-term target of 1.5 million bpd. That achievement opens the door to the country’s longer-term strategic goal of reaching 2.1 million bpd within the next three to five years.

The same factor behind OPEC’s higher long-term demand outlook — namely governments placing greater emphasis on energy security rather than rapidly moving away from hydrocarbons — has also played a major role in driving foreign investment and oil-sector development in Libya, particularly from Western energy companies.

Since the outbreak of the Russia-Ukraine war in February 2022, Western firms have been racing to secure alternative oil and gas supplies around the world to replace volumes lost due to sanctions on Russian energy exports.

The key question now is whether Libya’s long-term target of producing 2.1 million barrels per day is actually realistic.

Massive reserves put Libya back in focus

From a geological perspective, there is little preventing Libya from producing significantly more oil.

The country holds approximately 48 billion barrels of proven crude reserves, the largest in Africa. Before the fall of former leader Muammar Gaddafi in 2011, Libya had little difficulty maintaining production near 1.65 million barrels per day of high-quality, low-sulfur light crude.

Key grades such as Es Sider and Sharara were particularly prized in Mediterranean and Northwest European markets because of their strong gasoline and middle-distillate yields.

Production had also been steadily increasing, rising from roughly 1.4 million bpd in 2000, although it remained well below the more than 3 million bpd Libya achieved during the late 1960s.

More importantly, before 2011 the National Oil Corporation had already planned to deploy enhanced oil recovery technologies across aging fields.

The company estimated these techniques could add roughly 775,000 barrels per day of production capacity, a figure that appeared highly achievable. At the time, Western interest in developing new Libyan oil projects showed no signs of slowing.

In late 2021, Libya’s Government of National Unity approved the sale of Hess Corporation’s 8.16% stake in the giant Waha oil concessions to the remaining partners.

Those partners included TotalEnergies and ConocoPhillips, each holding 16.3%, with both companies set to split Hess’s share equally.

The move followed positive developments in April last year after National Oil Corporation Chairman Mustafa Sanalla met with TotalEnergies CEO Patrick Pouyanné.

The French energy giant agreed to continue efforts to increase production from the Waha, Sharara, Mabrouk, and Al Jurf fields by at least 175,000 barrels per day, while prioritizing development of the North Jalo and NC-98 fields within the Waha concession area.

According to the National Oil Corporation, the Waha assets alone are capable of producing at least 350,000 barrels per day.

Around the same period, reports emerged that Shell was considering a return to Libya after senior company representatives met with Sanalla during a visit to Tripoli.

Shell suspended operations in Libya in 2012, partly due to contractual issues but primarily because of the deteriorating security environment following Gaddafi’s overthrow.

Political divisions remain the biggest threat

By mid-2022, however, Libya faced another oil blockade after key elements of the historic September 2020 peace agreement failed to be fully implemented.

At the time, eastern Libyan National Army commander Khalifa Haftar made clear to the UN-backed Government of National Accord in Tripoli that the deal would only be temporary until a permanent mechanism for sharing oil revenues could be established.

The proposed solution, supported by both sides at the time, involved creating a joint technical committee responsible for overseeing oil revenues, ensuring fair distribution of resources, and monitoring implementation of the agreement.

The committee was also supposed to develop a unified national budget and ensure the Central Bank of Libya processed approved payments without delay.

Those arrangements were not fully implemented in 2022, contributing to another oil blockade, and many of the same issues remain unresolved today.

Instead, rival factions approved a national budget for 2026 worth 190 billion Libyan dinars, or roughly $29.6 billion.

The package included a protected operating budget of 12 billion dinars for the National Oil Corporation to support stable energy production.

Although the plan received backing from Central Bank Governor Naji Issa and international mediators including senior US adviser Massad Boulos, several political and military factions have criticized it as an elite power-sharing arrangement outside the democratic process.

Independent military councils and militias in western Libya, including groups in Tripoli, Misrata, and Zawiya, argue that the agreement forms the financial foundation of a US-backed political roadmap that would keep Abdul Hamid Dbeibeh as prime minister while elevating Saddam Haftar, son of Khalifa Haftar, to the presidency.

Key western Libyan institutions, including the Presidential Council and the High Council of State, have also rejected the arrangements, arguing that they bypass the UN-led peace process.

Former Grand Mufti Sheikh Sadiq Al-Ghariani has strongly opposed the budget, warning that it effectively hands power to Khalifa Haftar and his sons.

He has publicly called on western military forces and Prime Minister Dbeibeh to abandon the agreement, describing it as a betrayal that threatens the autonomy of western Libya.

Several factions also argue that the budget does not address corruption but merely reorganizes it into a more coordinated system.

Western confidence remains strong

Despite the risk that political disputes could once again trigger future oil blockades, Western governments and energy companies appear increasingly willing to return to Libya.

“There is a fundamental view that Libya has been troubled since 2011 and may remain troubled for some time,” a senior source involved in European energy security told OilPrice.

“But at some point the country may find a path toward stability, and there simply are not many alternative oil and gas opportunities of this scale available today.”

Against that backdrop, Italy’s Eni recently announced new gas discoveries offshore Libya near the Bahr Essalam field, the country’s largest producing offshore gas asset, with preliminary estimates pointing to more than 1 trillion cubic feet of gas.

The deepwater drilling campaign highlights Western confidence that operations in Libya can continue for many years, given the substantial capital commitments and long-term security assumptions such projects require.

BP is also working alongside Eni on the Mesla and Sirte Basin exploration program in Contract Area 38/3 in the Mediterranean.

The joint venture has committed to drilling an additional 16 wells across Libya, both onshore and offshore.

BP recently signed a memorandum of understanding to evaluate redevelopment options for the giant Sarir and Messla fields while also studying opportunities in unconventional oil and gas resources.

Meanwhile, TotalEnergies recently resumed production at Libya’s Mabrouk oil field, describing the move as evidence of its long-term commitment to the country.

US engineering and technology company KBR has also secured a contract to provide project management and technical services for the South Refinery project in Ubari, southwestern Libya, as part of broader efforts to upgrade Libya’s critical oil and gas infrastructure.

The message from international energy companies is becoming increasingly clear: despite Libya’s political risks, the scale of its reserves, the quality of its crude, and the potential for future production growth continue to make the country one of the most attractive energy opportunities in the world.