The Japanese yen strengthened against a basket of major and minor currencies during Asian trading on Tuesday and was on track to post its third gain in the past four sessions against the US dollar, benefiting from a pause in the dollar's recent rally ahead of the release of key US inflation data for June.

Global oil prices continued to surge as military exchanges between the United States and Iran intensified around the Strait of Hormuz, reviving concerns over mounting inflationary pressures on central banks and reinforcing expectations that interest rates will remain elevated or that additional monetary tightening could be required in the near term.

The Price

The US dollar fell around 0.15% against the yen to 162.22, after opening at 162.43 and reaching an intraday high of 162.47.

The yen ended Monday down 0.5% against the dollar, marking its first daily loss in the previous three sessions, as renewed tensions surrounding the Strait of Hormuz boosted demand for the US currency.

US dollar

The US Dollar Index fell more than 0.1% on Tuesday, retreating from a two-week high of 101.33 as the greenback paused its advance against a basket of global currencies.

In addition to profit-taking, investors refrained from building fresh long-dollar positions ahead of the release of June's US inflation data, which is expected to provide crucial guidance on whether the Federal Reserve will raise interest rates later this year.

Federal Reserve Governor Christopher Waller said on Monday that the US central bank may need to raise interest rates "in the near term" if upcoming data shows inflation remains well above the Fed's 2% target.

Global oil prices

Oil prices climbed more than 2% on Tuesday, extending gains for a second consecutive session and reaching their highest level in a month as military strikes between the United States and Iran continued around the Strait of Hormuz.

The sustained rally in oil prices has renewed fears of accelerating inflation, increasing the likelihood that central banks may raise interest rates in the near future, marking a sharp reversal from pre-war expectations for rate cuts or an extended pause in policy tightening.

Latest developments in the Iran conflict

US forces carried out an intensive five-hour bombing campaign targeting Revolutionary Guard military positions in several Iranian cities.

President Donald Trump proposed imposing a 20% tariff on goods passing through the Strait of Hormuz and reinstated the naval blockade on Iran.

CENTCOM officially announced that it will resume enforcing the naval blockade on vessels traveling to and from Iranian ports beginning at 4:00 p.m. US Eastern Time on Tuesday.

Iran's Revolutionary Guard announced additional missile and drone attacks on US bases in several Gulf countries, while also targeting oil tankers attempting to transit the Strait of Hormuz.

Japanese interest rates

Amid rising global oil prices, markets have increased the probability of a 25-basis-point rate hike by the Bank of Japan to above 30%.

The probability of a quarter-point rate increase at the Bank of Japan's October meeting has climbed above 85%.

Investors are now awaiting additional Japanese data on inflation, employment, and wage growth to reassess the outlook for Bank of Japan policy.