The Japanese yen strengthened against a basket of major and minor currencies during Asian trading on Wednesday, resuming its advance against the US dollar after a brief pause in the previous session and moving back toward its highest level in three months.

The latest gains come as monetary authorities in both Japan and the United States continue to closely monitor currency markets following recent intervention rounds aimed at supporting the yen and limiting excessive volatility.

Meanwhile, lower global oil prices are easing inflationary pressures on the Bank of Japan, reducing expectations for another interest rate hike at its September meeting as policymakers await additional economic data and evidence on the path of monetary policy normalization through the remainder of the year.

The Price

Exchange rate today: The US dollar fell 0.25% against the Japanese yen to 157.30 from the day's opening level of 157.70, after touching an intraday high of 157.81.

The yen ended Tuesday down 0.35% against the US dollar, its first daily decline in five sessions, as traders engaged in profit-taking after the currency reached a three-month high of 155.23 per dollar.

US dollar

The US Dollar Index slipped 0.1% on Wednesday, extending losses for a second consecutive session as the greenback weakened against a basket of major global currencies.

The decline comes amid improving market sentiment following reports suggesting that the United States and Iran are nearing an agreement that would fully reopen the Strait of Hormuz to international shipping.

Global oil prices

Oil prices fell more than 0.5% on Wednesday, extending losses for a second straight day and hitting their lowest levels in three weeks as concerns over global supply disruptions eased with expectations that the Strait of Hormuz will soon reopen and military strikes between the United States and Iran remain on hold.

Lower oil prices also reduce inflationary pressures, reinforcing expectations that major central banks may keep monetary policy unchanged for an extended period this year.

Developments in the Iran conflict

The United States and Iran are reportedly close to signing a temporary agreement, brokered by Oman, to reopen the Strait of Hormuz and ensure the uninterrupted flow of global energy supplies.

Washington and Doha have both announced progress in mediation efforts, with proposals continuing to be exchanged between mediators and Iran.

Tehran confirmed that talks with Oman regarding navigation through the Strait of Hormuz are advancing, while denying that any direct negotiations are taking place with the United States.

Reports indicate that Iran is considering allowing European countries to participate in clearing naval mines from the Strait of Hormuz.

Most forecasts suggest that an understanding to ease the crisis and reopen the Strait could be reached on Wednesday or Thursday.

US President Donald Trump described the current talks as Iran's "last chance" to reach a settlement that would end the five-month conflict.

Iranian President Masoud Pezeshkian said his country is defending its borders and has no intention of expanding the war.

Monetary authorities

The yen's renewed strength reflects the continuing impact of recent currency market interventions, as authorities in both Japan and the United States remain closely focused on exchange rate movements amid growing expectations that additional measures could be taken if excessive volatility returns.

On Tuesday, US Treasury Secretary Scott Bessent said the United States would do "whatever it takes" to support Japan's efforts to stabilize the foreign exchange market and strengthen the yen. In an interview with Japan's NHK, he also expressed confidence that Bank of Japan Governor Kazuo Ueda would "do what is best" to support the Japanese economy.

Those remarks followed a series of statements from Bessent calling for higher Japanese interest rates, fueling speculation that the Bank of Japan could raise rates at its September meeting.

Japanese interest rates

Market pricing for a quarter-point Bank of Japan rate hike in September has fallen below 80%.

Investors now await additional inflation, employment, and wage data from Japan to reassess the outlook for monetary policy.