The Japanese yen neared its weakest level in 40 years against the US dollar on Friday, extending losses for a second consecutive session as investors kept a close watch on Japanese authorities for any signs of intervention in the foreign exchange market.

Global oil prices remained close to one-month highs due to supply disruptions through the Strait of Hormuz, renewing concerns over inflationary pressures on the Bank of Japan and strengthening expectations of another Japanese interest rate hike in October.

The Price

The US dollar rose around 0.1% against the yen to 162.47, from an opening level of 162.38, after touching an intraday low of 162.31.

The yen closed Thursday down 0.15% against the dollar, marking its first daily loss in three sessions after stronger-than-expected US jobless claims data.

Weekly performance

For the week so far, with trading set to conclude at Friday's settlement, the Japanese yen is down around 0.5% against the US dollar and is on track for a second consecutive weekly loss.

Japanese authorities

The yen has once again come under close scrutiny as it approaches its weakest levels since 1986 against the US dollar, increasing speculation that Japanese authorities could intervene to support the currency and curb excessive weakness.

US dollar

The dollar index rose 0.1% on Friday, extending gains for a second straight session as the US currency strengthened against a basket of major and minor currencies.

Demand for the dollar as a safe-haven asset remained firm as military exchanges between the United States and Iran continued to intensify alongside declining shipping traffic through the Strait of Hormuz, raising concerns over disruptions to global oil supplies.

Latest developments in the Iran conflict

The United States launched a sixth consecutive day of airstrikes targeting sites inside Iran.

Iran's Revolutionary Guard responded with retaliatory ballistic missile and drone attacks targeting military bases hosting US forces across the region.

Iran warned that the Strait of Hormuz remains a "red line," pledging to respond to any attacks on its infrastructure.

Reports indicated that Tehran is considering broadening its response, including threatening shipping routes in the Red Sea if US strikes continue.

The US fleet, consisting of 20 warships and hundreds of fighter aircraft in the region, continues to intercept vessels traveling to and from Iranian ports.

Recent developments suggest that the temporary de-escalation agreement reached in June has effectively collapsed, with negotiations halted and large-scale military operations resuming.

Japanese interest rates

As global oil prices continue to rise, market pricing for a 25-basis-point rate hike by the Bank of Japan at its July meeting has climbed above 30%.

Expectations for a quarter-point rate hike at the Bank of Japan's October meeting have increased to above 85%.

Investors now await additional Japanese inflation, employment, and wage data for further guidance on the outlook for monetary policy.