Market attention on Wednesday centered on the Japanese yen, which saw sharp fluctuations as traders assessed the impact of the newly announced US-Japan trade deal and speculated over the future of Prime Minister Shigeru Ishiba.

The yen initially surged to its strongest level since July 11 at 146.20 per dollar, supported by President Donald Trump's announcement of a trade agreement with Tokyo. However, it quickly reversed into losses following reports suggesting Ishiba planned to resign next month after his party suffered a major defeat in the upper house elections.

Ishiba denied the reports, stating that claims of his resignation were completely baseless, which helped the yen recoup some losses and later stabilize at 146.83 per dollar.

The trade dealwhich includes tariff cuts on car imports and shields Tokyo from new harsh dutiesimpacts the yen in two ways: its effect on the economy and on Bank of Japan policy, which has been cautiously moving toward rate hikes.

The trade agreement opens the door for the Bank of Japan to raise rates this year, said Jane Foley, head of FX strategy at Rabobank. Thats positive for the yen and makes a return to 150 per dollar more difficult.

She added, With trade and political uncertainty lingering, it was clear the bank would not act hastily. Of course, the uncertainty isnt over yet, which will keep the BoJ cautiousbut nobody expected swift moves anyway.

Elsewhere, movements in other currencies were limited amid persistent uncertainty over tariffs and broader skepticism on how currencies might react even if trade clarity emerges.

The US dollar has been one of the biggest losers since Trump first announced sweeping tariffs on April 2. While the weakness continued even after a temporary suspension to allow further negotiations, the pace of decline has slowed this month.

The euro slipped 0.1% to $1.1744, still near its four-year high reached earlier this month. Meanwhile, the British pound edged up slightly to $1.1354.

In contrast to the euros performance, European equities climbed on hopes the Japan deal could pave the way for further trade agreements, including one with the European Union.

Trump announced that EU negotiators would arrive in Washington on Wednesday.

The European Central Bank is expected to meet on Thursday, though it is unlikely to have a major impact on the currency, as interest rates are expected to remain unchanged.

Improved sentiment toward the global economy following the trade deal, along with rising metal prices, also supported the Australian dollar, which rose 0.4% to $0.6581, despite ongoing market caution.

As of 11:57 GMT, the US dollar index rose 0.1% to 97.4 points, with a high of 97.5 and a low of 97.3 points.