The Japanese yen declined against a basket of major and minor currencies in Asian trading on Thursday, extending its losses against the US dollar for a second consecutive day and approaching a two-week low, as investors continued to favor the US currency as a safe haven amid persistent disagreements and complex negotiations between the US and Iran over the Strait of Hormuz.

With markets increasingly expecting the Bank of Japan to raise interest rates in September, attention is turning to upcoming economic data for fresh clues on inflation and economic activity, and whether conditions will support a faster pace of monetary policy normalization in Japan this year.

The Price

The Japanese yen today: The dollar rose around 0.1% against the yen to 159.49, from an opening level of 159.40, while recording a low of 159.24.

The yen ended Wednesday down 0.1% against the dollar, marking its second loss in three days, after touching a two-week low of 159.54.

US dollar

The US Dollar Index rose 0.1% on Thursday, extending its gains for a fourth consecutive session and reflecting continued strength in the US currency against a basket of global currencies.

Demand for the US dollar remains supported by uncertainty surrounding negotiations between the US and Iran over the Strait of Hormuz, amid reports of persistent disagreements over the framework governing international shipping and security guarantees for the vital waterway.

US producer price data for July is due later today and could provide important clues about the likelihood of the Federal Reserve raising interest rates this year.

Global oil prices

Oil prices rose around 0.5% on Wednesday, resuming their advance after a brief correction from a two-week high.

The rebound came amid continued uncertainty over a potential US-Iran agreement on the Strait of Hormuz and persistent concerns about the security of energy supplies from the Middle East.

Hormuz developments

US President Donald Trump said the US has "complete control" of the Strait of Hormuz and suggested that Washington could retain that control.

Iran denied that the US controls the strait and said Hormuz would remain closed until Washington meets its conditions.

Indirect contacts through mediators are continuing, but disagreements over the conditions for reopening the strait and US commitments are preventing a final agreement.

An Iranian official said Tehran wants Washington to return to the terms of the previous interim agreement and establish a timetable for implementing its commitments.

An Iranian source said there are no discussions between Iran and the US about extending the ceasefire.

Sources said the Pakistani mediator remains optimistic about extending the 60-day ceasefire by another 60 or 90 days.

Ship traffic through the Strait of Hormuz has fallen to its lowest level in three months, at only around 6 to 8 vessels per day compared with about 140 before the war.

Japanese interest rates

Markets currently price an 85% probability that the Bank of Japan will raise interest rates by 25 basis points at its September meeting.

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

Yen outlook

We expects the yen to remain under pressure against the US dollar. If US producer price data comes in stronger than market expectations, the yen could extend its losses against the dollar.