The Japanese yen fell against a basket of major and minor currencies in Asian trading on Monday, resuming losses against the US dollar after a temporary rebound on Friday, as demand for the US currency increased amid growing uncertainty over ongoing negotiations between the United States and Iran to reopen the Strait of Hormuz.

A growing number of Bank of Japan policymakers have called for a more decisive response to rising inflation risks, strengthening expectations for a Japanese interest-rate hike in September.

The Price

USD/JPY today: The US dollar rose 0.4% against the yen to 158.35, from an opening level of 157.70, after recording a session low of 157.62.

The yen ended Friday 0.4% higher against the dollar, its first gain in four sessions, following bleak US employment data.

The yen lost around 0.25% against the dollar last week, driven by correction and profit-taking from a three-month high of 155.23.

Monetary authorities

Monetary authorities in Japan and the United States continue to closely monitor movements in the yen, with expectations growing that further intervention in the foreign-exchange market could be considered if excessive volatility returns.

US dollar

The US Dollar Index rose around 0.2% on Monday, beginning to recover from a two-month low and reflecting a rebound in the US currency against a basket of global currencies.

Alongside bargain buying from lower levels, the dollar is gaining support from continued uncertainty surrounding negotiations between the United States and Iran over the Strait of Hormuz, amid reports that disagreements remain over the mechanism for regulating international shipping and security guarantees in the vital waterway.

Global oil prices

Oil prices rose more than 2% on Monday at the start of the week's trading, amid uncertainty surrounding a potential US-Iran agreement over the Strait of Hormuz and renewed concerns about the security of supplies from the Middle East.

Hormuz developments

Iran has linked the reopening of the Strait of Hormuz to US concessions on several demands, including compensation, an end to military threats, the lifting of sanctions and the termination of the naval blockade.

The Iranian-Omani agreement on shipping routes is approaching its final stages, but Tehran says the agreement alone would not mean the full reopening of the strait.

The Islamic Revolutionary Guard Corps says the strait will not reopen until the United States responds to Tehran's demands, reducing hopes for a rapid return to normal shipping traffic.

Washington continues to keep the military option on the table alongside diplomatic and economic measures, while the US administration maintains pressure on Iran to reach an agreement.

US President Donald Trump said his administration is dealing with Iran "quietly" through back channels and described the negotiations as being "like a chess match."

Bank of Japan

A summary of opinions from the Bank of Japan's July meeting, released on Monday, showed that at least three of the nine board members believe the central bank can raise interest rates at a faster pace than its current rate of roughly two increases per year, signaling growing concern within the BOJ that monetary policy could fall behind rising inflationary pressures.

The hawkish tone has strengthened market expectations that the Bank of Japan could raise interest rates as early as September, particularly amid increasing pressure on Tokyo to support the yen following comments from US Treasury Secretary Scott Bessent about the need for Japan to normalize monetary policy, as well as the possibility of coordination between Tokyo and Washington to curb yen weakness, according to analysts.

Japanese interest rates

Market pricing for the probability of a 25-basis-point Bank of Japan rate hike in September increased to 85% from 75%.

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

Japanese yen outlook

We expect the Japanese yen to remain under pressure against a basket of global currencies. The yen could begin to recover if Japanese and US monetary authorities start signaling the possibility of renewed intervention in the foreign-exchange market.