The Japanese yen strengthened against a basket of major and minor currencies during Asian trading on Wednesday, extending gains against the US dollar for a second consecutive session as the greenback softened following weaker-than-expected US inflation data.

Global oil prices remain close to one-month highs due to ongoing supply disruptions through the Strait of Hormuz, renewing concerns over rising inflationary pressures on the Bank of Japan and reinforcing expectations for further interest rate hikes.

The Price

The US dollar fell about 0.2% against the Japanese yen to 161.96, after opening at 162.24 and reaching an intraday high of 162.26.

The yen closed Tuesday up 0.1% against the US dollar, marking its third daily gain in the past four sessions, supported by softer US inflation data.

US dollar

The US Dollar Index fell 0.15% on Wednesday, extending losses for a second consecutive session as the greenback weakened against a basket of global currencies.

US June inflation data came in below expectations, driven by lower energy prices, signaling easing inflationary pressures on Federal Reserve policymakers.

US Treasury yields declined as expectations for near-term Federal Reserve rate hikes eased, while investors await additional economic data and comments from Fed officials for clearer guidance on the future path of monetary policy.

Global oil prices

Oil prices rose more than 0.5% on Wednesday, extending gains for a third straight session and approaching the one-month high reached on Tuesday as military clashes between the United States and Iran continued around the Strait of Hormuz.

Iran conflict developments

The United States officially began enforcing its naval blockade of Iranian ports and monitoring vessels entering and leaving the country.

US forces carried out fresh strikes targeting Iranian missile systems and air defense positions near the Strait of Hormuz in a further escalation of the conflict.

Iran announced new drone attacks against US-linked targets and military bases across the region while maintaining a heightened state of military alert.

Iranian authorities said Washington is mistaken if it believes these actions will force Tehran back to the negotiating table.

US President Donald Trump issued a public warning to Tehran, threatening to destroy all power stations and key bridges across Iran "next week" unless the country agrees to immediately resume negotiations.

Japanese interest rates

Amid higher global oil prices, market pricing for a 25-basis-point Bank of Japan rate hike at the July meeting has risen above 30%.

Pricing for a 25-basis-point rate hike at the October meeting has climbed above 85%.

Investors now await additional Japanese inflation, employment, and wage data to further refine expectations for the Bank of Japan's policy path.