The Japanese yen fell against a basket of major and minor currencies in Asian trading on Monday, resuming losses against the US dollar after a brief pause on Friday and touching a two-week low.

The currency is moving closer to its weakest level in 40 years as investors increasingly turn to the US dollar as the preferred safe-haven asset amid escalating military strikes between the United States and Iran.

Global oil prices surged to their highest level in six weeks as supplies through the Strait of Hormuz were disrupted, renewing concerns over mounting inflationary pressures on the Bank of Japan and strengthening expectations of a Japanese interest rate hike in October.

The Price

The dollar rose 0.15% against the yen to 162.58, its highest level since July 9, after opening at 162.36 and touching a low of 162.31.

The yen ended Friday up less than 0.1% against the dollar, marking its third gain in four sessions amid speculation that Japanese authorities could intervene in the currency market.

The yen lost 0.45% against the dollar last week, posting its second consecutive weekly decline as military confrontation between the United States and Iran intensified.

Japanese authorities

The yen has returned to the spotlight after moving close to its weakest levels against the US dollar since 1986, raising expectations that Japanese authorities could intervene to protect the currency from excessive depreciation.

US dollar

The dollar index rose around 0.2% on Monday, extending gains for a third consecutive session and reflecting continued strength in the US currency against a basket of global currencies.

Investors are increasingly buying the dollar as a safe-haven asset as military strikes between the United States and Iran continue to escalate, while shipping traffic through the Strait of Hormuz declines.

Global oil prices

Oil prices rose around 3% on Monday, extending gains for a second consecutive session and reaching their highest level in six weeks amid mounting risks in the Middle East and Iranian threats to halt all traffic through the Strait of Hormuz.

The rise in global oil prices is renewing fears of accelerating inflation, which could prompt central banks worldwide to raise interest rates in the near term, marking a sharp reversal from pre-war expectations that rates would either be cut or held steady for an extended period.

Latest developments in the Iran conflict

The United States launched a fresh wave of airstrikes against targets inside Iran for a ninth consecutive day.

The US strikes targeted military sites linked to Iran's missile and defence capabilities in an effort to weaken Tehran's ability to control the Strait of Hormuz.

Iran's Revolutionary Guard launched coordinated retaliatory attacks using ballistic missiles and drones against military bases hosting US forces across the region.

Iran said that not "a single drop" of oil or gas would pass through the Strait of Hormuz if US military operations continued, escalating threats surrounding one of the world's most important energy routes.

Shipping traffic through the Strait of Hormuz declined sharply as security risks, inspections, and reciprocal attacks continued.

The US Navy said it had intercepted and rerouted six commercial vessels and disabled a seventh as part of efforts to enforce a strict naval blockade on Iranian ports and isolate the country's coastline.

Japanese interest rates

Amid rising global oil prices, markets increased the probability of the Bank of Japan raising interest rates by 25 basis points at its July meeting to more than 30%.

Expectations of a quarter-point rate hike at the Bank of Japan's October meeting rose above 90%.

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