The Japanese yen weakened in Asian trading on Monday against a basket of major and secondary currencies, extending its losses for a sixth consecutive session against the US dollar and hitting its lowest level in three weeks, as fears of a renewed Iran conflict drove investors toward the US currency as a preferred safe-haven asset.

Oil prices continue to rise in global markets, increasing inflationary pressure on Bank of Japan policymakers and strengthening expectations for a Japanese interest rate hike in June.

Price Overview

Japanese yen exchange rate today: The dollar rose against the yen by 0.2% to 159.05, the highest level since April 30, from todays opening level of 158.72, while recording an intraday low of 158.68.

The yen ended Friday down 0.25% against the dollar, marking its fifth consecutive daily loss, due to rising US Treasury yields.

The yen lost 1.3% against the dollar last week, recording its first weekly decline in three weeks and its biggest weekly loss since February, following US inflation data that came in above market expectations.

US Dollar

The dollar index rose 0.15% on Monday, extending gains for a sixth consecutive session and hitting a six-week high, reflecting continued broad strength in the US currency against a basket of global currencies.

The dollar received additional support from rising US Treasury yields, which climbed to their highest levels in a year, as investors bet that the Federal Reserve will raise interest rates at least once this year.

Data released last week in the United States showed consumer prices in April rose at the fastest pace in three years, while producer prices increased at the strongest pace in four years, highlighting renewed inflationary pressure on Federal Reserve policymakers.

According to the CME FedWatch tool, markets are now pricing in a 45% probability of a Federal Reserve rate hike in December, up from just over 16% at the beginning of May.

Investors also continue buying the US dollar as a safe haven, as renewed Middle East tensions helped lift oil prices and reduce risk appetite amid ongoing bond market selling.

Global oil prices

Global oil prices rose more than 2% on Monday, extending gains for a third consecutive session and reaching their highest levels in two weeks, amid fears of renewed military confrontation between the United States and Iran and the continued closure of the Strait of Hormuz to international oil tankers.

Latest developments in the Iran conflict

US President Donald Trump issued a stern warning to Iran, saying that time is running out very quickly to reach a peace agreement, or there will be nothing left.

Trump is preparing to hold a key meeting in the White House Situation Room with national security leaders to discuss plans for resuming military strikes against Iranian energy facilities and infrastructure.

Trump held a phone call lasting more than half an hour with Israeli Prime Minister Benjamin Netanyahu to discuss options for returning to full-scale military action.

The UAE announced it is investigating the source of the drone attack, while Saudi Arabia intercepted three drones in Iraqi airspace.

An Iranian official warned of surprise scenarios if the United States resumes military strikes against Tehran.

Additional Japanese budget

Japanese Prime Minister Sanae Takaichi is expected to instruct the government on Monday to consider preparing an additional budget package, although the size of the package has not yet been determined.

A government source familiar with the matter told Reuters on Monday that Japan is likely to issue new debt as part of financing a planned supplementary budget aimed at easing the economic impact of the Middle East war.

Japanese interest rates

Amid rising global oil prices, markets continue to price in an approximately 80% probability that the Bank of Japan will raise interest rates by a quarter percentage point at its June meeting.

Investors are awaiting further Japanese data on inflation, unemployment, and wages in order to reassess those expectations.