The Japanese yen edged higher in Asian trading on Wednesday against a basket of major and minor currencies, attempting to recover after three consecutive sessions of losses against the US dollar. The move was supported by limited bargain buying, while the US currency remained under pressure ahead of the Federal Reserves monetary policy decision.
Dovish remarks from Bank of Japan Deputy Governor Shinichi Uchida helped ease market concerns about the pace of Japanese monetary tightening. Speaking at the post-meeting press conference on behalf of Governor Kazuo Ueda, who is currently hospitalized, Uchida delivered a less hawkish message than investors had expected, reducing the likelihood of another rate hike before December.
Price action
USD/JPY slipped by less than 0.1% to 160.27 yen, from an opening level of 160.37 yen, after touching an intraday high of 160.44 yen.
The yen closed Tuesday down by less than 0.1% against the dollar, marking its third consecutive daily decline, following Uchidas comments.
US dollar
The US Dollar Index fell by less than 0.1% on Wednesday, extending losses for a third straight session as the greenback continued to weaken against a basket of global currencies.
The decline comes amid ongoing optimism surrounding a temporary peace agreement between the United States and Iran, which has improved risk sentiment and reduced demand for the dollar as a traditional safe-haven asset.
The current weakness in the US currency also precedes the outcome of the first Federal Reserve meeting under new Chair Kevin Warsh, with markets looking for any signals that interest rate cuts could be considered later this year.
Oil prices
Global oil prices fell by more than 1% on Wednesday, extending losses for a fourth consecutive session and hitting their lowest levels in three months as concerns about supply disruptions continued to ease.
US-Iran agreement
President Donald Trump said he may submit details of the preliminary agreement with Iran to Congress.
Switzerlands Foreign Ministry said a potential memorandum of understanding between the United States and Iran is scheduled to be signed on June 19 in Brgenstock, central Switzerland.
The Wall Street Journal reported that the agreement would allow Tehran to resume oil sales immediately upon signing.
Irans Foreign Minister said that after the initial phase, negotiations would continue for 60 days to reach a final agreement covering the nuclear issue and sanctions relief.
A source told Reuters that the US-Iran agreement includes a $300 billion fund, with more than half already allocated for reconstruction projects in Iran.
The fund contains no government money and remains separate from negotiations over frozen Iranian assets.
Japanese interest rates
On Tuesday, the Bank of Japan raised its benchmark interest rate by 25 basis points to 1.0%, the highest level since 1995, marking another historic step in the normalization of monetary policy in the worlds fourth-largest economy.
Deputy Governor Shinichi Uchida said the central bank will continue raising rates gradually in response to developments in economic activity and inflation, stressing that policymakers will not rush into aggressive tightening.
Uchida added that it is currently difficult to determine the exact scale of future rate increases and that the bank will carefully assess incoming economic data before taking further action.
Market pricing for a 25-basis-point rate hike at the July meeting dropped from 50% to 25%.
Economic surveys indicate that the most likely scenario remains another 25-basis-point increase in December.
Investors will continue to monitor inflation, employment, and wage data for further clues on the future path of Japanese monetary policy.