The Japanese yen weakened in Asian trading on Monday against a basket of major and minor currencies, resuming losses that were briefly interrupted on Friday against the US dollar. The currency is once again approaching a two-year low as Japanese authorities continue to stress their readiness to intervene in the foreign exchange market to protect the yen from excessive volatility.

The US dollar continues to receive strong support from investors seeking the most attractive available investment opportunities following the Federal Reserve's hawkish meeting last week. This has overshadowed the negative impact of declining safe-haven demand after the conclusion of the first round of US-Iran negotiations in Switzerland, which resulted in a 60-day roadmap aimed at reaching a final agreement between the two sides.

The Price

Japanese yen exchange rate today: The dollar rose 0.25% against the yen to 161.61, from an opening level of 161.22. The session low was recorded at 161.22.

The yen ended Friday up 0.1% against the dollar, its first gain in six sessions, as part of a recovery from a two-year low of 161.81.

The yen lost 0.7% against the dollar last week, marking its third weekly decline in a month, as US Treasury yields rose following the Federal Reserve meeting.

Japanese authorities

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

Sources told Reuters that Tokyo intervened several times in late April and early May to halt the yen's decline. At the time, the exchange rate reached 160.72 per US dollar, its weakest level since July 2024.

Japanese Finance Minister Satsuki Katayama said during her latest press conference on Monday that authorities are fully prepared to take decisive action and intervene directly in the foreign exchange market at any time to protect the yen from speculative movements.

Katayama stressed that the ministry's position remains unchanged, stating: "We will respond appropriately and directly to foreign exchange market fluctuations whenever necessary." She deliberately refrained from identifying a specific exchange rate as a trigger for intervention, as part of a strategy of constructive ambiguity designed to deter speculators.

Views and analysis

Matt Simpson, Senior Market Analyst at StoneX, said: "Japan's Ministry of Finance may be concerned about the US dollar rising against the yen to its highest level of 2024."

Simpson added: "It may also feel powerless to do much about it, as intervening against the backdrop of a hawkish Federal Reserve and strong US economic data could prove both costly and ineffective."

Japanese interest rates

The Bank of Japan raised its benchmark interest rate by 25 basis points last week to 1.0%, the highest level since 1995, marking another historic step in the normalization of monetary policy in the world's fourth-largest economy.

Bank of Japan Deputy Governor Ryozo Himino said on Friday that inflation could exceed the central bank's 2% target and warned about the cost of delaying rate hikes, reaffirming the bank's intention to continue raising borrowing costs.

Economic surveys indicate that the most likely baseline scenario is for the Bank of Japan to deliver an additional 25-basis-point rate increase in December.

Market pricing for a quarter-point rate hike at the Bank of Japan's July meeting currently remains below 25%.

Investors are awaiting additional inflation, unemployment, and wage data from Japan to reassess those expectations.

US dollar

The US Dollar Index rose 0.15% on Monday, resuming gains that paused on Friday and moving back toward a 13-month high, reflecting continued strength in the US currency against a basket of global currencies.

The advance is being driven by demand for the dollar as the most attractive available investment, particularly after the Federal Reserve's latest meeting, which was more hawkish than markets had anticipated and significantly strengthened expectations for at least one US interest rate hike this year.

That has outweighed the negative impact of fading safe-haven demand following the conclusion of the first round of US-Iran negotiations in Switzerland, which produced a 60-day roadmap aimed at reaching a final agreement between the two countries.

US-Iran negotiations

The first round of US-Iran negotiations in Switzerland concluded in what was described as a "positive and constructive" atmosphere despite the tensions and mutual threats that preceded the talks.

The high-level discussions ended early Monday, with technical meetings scheduled to resume later this week.

Mediators, Qatar and Pakistan, announced that both sides had agreed on a roadmap toward a final agreement within 60 days, representing the most significant diplomatic progress in months.

The parties also agreed to establish a high-level committee to oversee future negotiations, along with a permanent communication mechanism aimed at preventing further escalation.