The Japanese yen fell in Asian trading on Monday against a basket of major and minor currencies, resuming losses that were briefly halted on Friday against the US dollar. The currency is close to touching a two-year low, which sits just one point away from its weakest level since 1986, a move that could prompt Japanese authorities to intensify warnings over excessive foreign-exchange moves or even intervene directly to support the local currency if pressure continues.

Market pricing for a Bank of Japan interest rate hike in July remains weak, leaving investors awaiting further data on developments in the worlds fourth-largest economy for new signals that could lead them to reassess those expectations.

The Price

Japanese yen exchange rate today: The US dollar rose around 0.1% against the yen to 161.86, from an opening level of 161.71, after touching an intraday low of 161.71.

The yen ended Fridays session up 0.1% against the dollar, its first gain in five sessions, as part of a recovery from a two-year low of 161.94, which stands just one point away from the 40-year low of 161.95.

The yen lost 0.3% against the dollar last week, marking a second consecutive weekly decline amid renewed concerns over the interest rate gap between Japan and the United States.

US dollar

The US Dollar Index rose around 0.1% on Monday, resuming gains that had paused for two sessions as part of a correction and profit-taking from a 13-month high, reflecting renewed strength in the US currency against a basket of global currencies.

The rise came amid buying of the dollar as the preferred alternative investment, especially after renewed military tensions between the United States and Iran following attacks by Irans Revolutionary Guard on several vessels.

Iran war developments

The United States and Iran have halted hostilities, while navigation through the Strait of Hormuz has resumed following weekend clashes.

The United States carried out strikes targeting Iranian sites in response to Irans Revolutionary Guard targeting several vessels in the Strait of Hormuz.

Gulf states condemned Iranian missile and drone attacks on Bahrain and Kuwait.

Israel announced that it had renewed attacks on Hezbollah in southern Lebanon.

Technical negotiations are scheduled to resume on Tuesday in Doha, with both sides focusing on disputes related to the Strait of Hormuz, particularly freedom of navigation and the mechanism for managing the maritime corridor.

Japanese authorities

Japanese authorities are closely monitoring movements in the currency market, especially as the yen approaches its weakest levels in 40 years after breaching the key 160-per-dollar threshold, which is widely viewed as a red line that could prompt renewed intervention to support the currency.

Last week, Japanese Finance Minister Satsuki Katayama held an online meeting with US Treasury Secretary Scott Bessent amid growing concerns over sharp currency volatility.

According to sources cited by Reuters, the meeting focused on proposed policies to address the yens historic weakness, including possible intervention in the foreign exchange market.

Katayama stressed that government authorities are fully prepared and ready to take decisive action and intervene directly in the foreign exchange market at any time to protect the yen from speculative moves.

Japanese interest rates

A summary of opinions from the Bank of Japans June monetary policy meeting, published last week, showed that some board members called for additional monetary tightening to move the central banks benchmark interest rate toward levels considered neutral for the economy.

Market pricing for a 25-basis-point rate hike by the Bank of Japan at its July meeting currently remains below 25%.

To reassess those expectations, investors are awaiting more data on inflation, unemployment, and wage growth in Japan.