The Japanese yen declined in Asian trading on Friday against a basket of major and secondary currencies, extending its losses against the US dollar for a fourth consecutive session and heading toward a weekly decline as demand for the US currency increased amid growing uncertainty surrounding negotiations between the United States and Iran over reopening the Strait of Hormuz.

The renewed rise in global oil prices is reviving concerns about inflationary pressures facing Bank of Japan policymakers, strengthening expectations for an interest rate hike at the September meeting. Investors are awaiting further economic data and evidence that could clarify the path of Japanese monetary policy normalization over the remainder of the year.

The Price

The Japanese yen today: The dollar rose 0.1% against the yen to 158.57, from today's opening level of 158.41, after recording a low of 158.22.

The yen ended Thursday down 0.40% against the dollar, marking its third consecutive daily loss, as correction and profit-taking continued following its rally to a three-month high of 155.23.

Weekly trading

So far this week, which officially concludes with Friday's settlement, the Japanese yen is down 0.75% against the US dollar and is on track for its third weekly loss in a month.

US dollar

The US Dollar Index rose by less than 0.1% on Friday, holding gains for a second consecutive session and reflecting continued strength in the US currency against a basket of global currencies.

Demand for the US dollar as a safe haven is increasing as uncertainty persists over negotiations between the United States and Iran concerning the Strait of Hormuz, amid reports of continuing disagreements over how international shipping should be regulated and what security guarantees should apply to the vital waterway.

The US jobs report for July is due later today and will provide crucial evidence on the likelihood of the Federal Reserve raising interest rates this year.

Global oil prices

Oil prices rose by around 0.5% on Friday, extending their recovery for a second consecutive session from three-month lows, supported by bargain buying and renewed concerns over the security of global energy supplies from the Middle East.

Hormuz negotiations

Diplomatic sources said Iran and Oman are close to announcing a temporary agreement regulating and reopening inbound and outbound shipping routes through the Strait of Hormuz.

Tehran is demanding an end to the US naval blockade of its ports, the removal of recent oil sanctions, and the release of frozen Iranian assets as conditions for reopening the strait.

Iran's parliament has begun reviewing legislation that would prohibit vessels from certain countries, including the United States and Israel, from passing through the strait, while imposing fees and penalties on some ships using the waterway.

The White House rejects granting Iran the authority to impose mandatory transit fees on commercial vessels or establish a new security framework that could affect international freedom of navigation.

Oman continues efforts to bridge differences between Washington and Tehran, with reports indicating that proposals have been exchanged regarding the regulation of international shipping.

President Donald Trump said he believes the war will end very soon, describing the negotiations as a final opportunity for diplomacy.

Iran's chief negotiator accused Trump of "show diplomacy" as traffic through the Strait of Hormuz remains almost completely halted.

The Houthis announced new attacks, renewing concerns that further escalation could complicate negotiations and increase security risks across the region.

Japanese interest rates

With global oil prices rising again, market pricing for a 25-basis-point interest rate hike by the Bank of Japan at its September meeting increased from 70% to 80%.

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

Yen outlook

We expect that stronger-than-expected US employment data would increase expectations for higher US interest rates this year, potentially extending the dollar's gains against the Japanese yen.