The Japanese yen edged higher in Asian trading on Thursday against a basket of major and minor currencies, attempting to recover from its lowest level in two years against the US dollar. The currency is on track for its first daily gain in five sessions, supported by bargain buying and growing speculation that Japanese authorities may step in to support the local currency.

The US dollar retreated from a three-month high, while oil prices extended losses for a sixth consecutive session after the United States and Iran electronically signed a preliminary peace agreement.

Price action

USD/JPY today: The dollar fell 0.1% against the yen to 160.49, from an opening level of 160.62, after touching an intraday high of 160.75.

The yen ended Wednesday down 0.15% against the dollar, marking its fourth consecutive daily loss and hitting a two-year low of 160.80, pressured by the Federal Reserves hawkish policy meeting.

US dollar

The US Dollar Index slipped 0.2% on Thursday, pulling back from a three-month high of 100.57 points as the greenback weakened against a basket of global currencies.

In addition to profit-taking activity, the dollar is facing pressure from improving risk appetite following the preliminary peace agreement between the United States and Iran.

Global oil prices

Oil prices fell more than 0.5% on Thursday, extending losses for a sixth straight day and hovering near fresh three-month lows after the International Energy Agency warned of a supply surplus next year following the US-Iran agreement.

US-Iran agreement

The US and Iranian presidents officially signed the preliminary peace agreement electronically.

Pakistani Prime Minister Shehbaz Sharif said: I am honored to announce today the electronic signing of the historic Islamabad Memorandum of Understanding between the United States of America and the Islamic Republic of Iran.

Sharif confirmed that the formal signing ceremony between the United States and Iran will take place in Switzerland on Friday.

American and Iranian diplomatic and security delegations have begun arriving at the Brgenstock resort in Switzerland to finalize the details of the historic draft agreement ahead of Fridays official signing.

The Islamic Republic News Agency (IRNA) published photos showing Iranian President Pezeshkian signing the memorandum of understanding between Iran and the United States.

Iran announced that the historic agreement has officially entered into force.

Intervention zone

Japanese authorities are closely monitoring movements in the currency market, particularly as the yen approaches the 161 per dollar level. Trading beyond the key 160 threshold is increasingly viewed as a zone that could trigger renewed intervention.

Reuters sources indicated that Tokyo intervened several times in late April and early May to halt the yens decline. At that time, the exchange rate reached 160.72 per dollar, its weakest level since July 2024.

Japanese officials have repeatedly warned against excessive currency volatility, stressing that authorities are prepared to take decisive action against disorderly market moves.

Finance Minister Satsuki Katayama reaffirmed that the government is ready to take appropriate action if currency markets experience excessive or speculative movements.

Japanese interest rates

Economic surveys continue to point to a 25-basis-point rate hike by the Bank of Japan in December as the most likely scenario.

Money markets currently price the probability of a quarter-point rate increase at the July meeting at below 25%.

Investors are awaiting additional data on inflation, employment, and wages in Japan to reassess the outlook for future interest rate moves.