The euro fell in European trading on Wednesday against a basket of global currencies, extending its losses for a third consecutive session against the US dollar and hitting its lowest level in a year, as investors continued to favor the greenback as the most attractive currency and alternative investment in the foreign exchange market.

With global oil prices declining, inflationary pressures on European Central Bank policymakers are easing, reducing the likelihood of another ECB interest rate hike later this year.

The Price

• Euro exchange rate today: The euro fell about 0.2% against the dollar to $1.1361, its lowest level since June 2025, from an opening level of $1.1381. The session high was recorded at $1.1384.

• The euro ended Tuesday down 0.4% against the dollar, marking a second consecutive daily decline following the release of strong US economic data.

US dollar

The US Dollar Index rose more than 0.1% on Wednesday, extending gains for a third straight session and reaching a 13-month high of 101.51 points, reflecting continued strength in the US currency against a basket of global peers.

The advance is being driven by demand for the dollar as the most attractive available investment amid a steady stream of strong US economic data, which supports the Federal Reserve's inclination toward higher interest rates.

The dollar is also benefiting as an alternative safe-haven investment amid the ongoing selloff in global technology stocks.

Global oil prices

Global oil prices fell nearly 1% on Wednesday, deepening losses for a third consecutive session and touching their lowest levels in three months amid expectations of smoother crude flows through the Strait of Hormuz.

Lower oil prices help reduce concerns about accelerating inflation, reinforcing the case for the European Central Bank to leave monetary policy settings unchanged for an extended period this year.

European interest rates

• Reports suggest that the European Central Bank is considering pausing monetary policy normalization in July if energy prices remain at current levels.

• Money market pricing for a 25-basis-point ECB rate hike in July remains stable at around 30%.

• To reassess those expectations, investors are awaiting additional eurozone economic data, particularly inflation, unemployment, and wage figures.

The Japanese yen edged higher in Asian trading on Wednesday against a basket of major and minor currencies, attempting to recover from a two-year low against the US dollar amid modest bargain-buying activity at lower levels.

So far, the latest round of verbal warnings from Japanese officials has done little to ease pressure on the currency, as wide interest rate differentials between the United States and Japan persist, while markets remain uncertain about Tokyo's willingness to intervene.

The Price

• Japanese yen exchange rate today: The dollar fell around 0.1% against the yen to ¥161.45, from an opening level of ¥161.57. The session high was recorded at ¥161.63.

• The yen ended Tuesday little changed against the dollar after hitting a two-year low of ¥161.93 on Monday, close to its 40-year low of ¥161.95.

US dollar

The US Dollar Index rose more than 0.1% on Wednesday, extending gains for a third consecutive session and reaching a 13-month high of 101.51 points, reflecting continued strength in the US currency against a basket of global peers.

The advance has been driven by demand for the dollar as the most attractive available investment, supported by a series of strong US economic data releases that reinforce the Federal Reserve's inclination toward higher interest rates.

The dollar is also benefiting as an alternative safe-haven investment amid the ongoing selloff in global technology stocks.

Japanese authorities

Japanese authorities continue to closely monitor currency market movements as the yen approaches its weakest levels in 40 years after breaking above the key ¥160-per-dollar threshold, a level widely viewed as a potential trigger for renewed intervention.

Japanese Finance Minister Satsuki Katayama held an online meeting with US Treasury Secretary Scott Bessent late Monday amid growing concerns about sharp currency fluctuations.

According to Reuters sources, the discussions focused on policy options for addressing the yen's historic weakness, including the possibility of foreign exchange market intervention.

Katayama reiterated on Monday that government authorities are fully prepared to take decisive action and intervene directly in currency markets at any time to protect the yen from speculative moves.

Views and analysis

• Matt Simpson, Senior Market Analyst at StoneX, said Japan's Ministry of Finance may be increasingly concerned about the dollar-yen exchange rate climbing to its highest level of 2024.

• Simpson added that authorities may also feel unable to do much about it, as intervention against a hawkish Federal Reserve and strong US economic data could prove costly and ineffective.

• Former Bank of Japan board member Sayuri Shirai said the yen could weaken to ¥165 per dollar if the Federal Reserve raises interest rates this year.

Japanese interest rates

• The summary of opinions from the Bank of Japan's June monetary policy meeting, released on Wednesday, showed that some board members called for further monetary tightening to move the central bank's policy rate toward levels considered neutral for the economy.

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

• Investors are awaiting additional data on inflation, unemployment, and wage growth in Japan to reassess those expectations.

US President Donald Trump's renewed threats to strike Iran, combined with Iranian negotiators once again walking away from talks in Switzerland, have revived uncertainty surrounding the future of one of the world's most critical oil transit routes.

Although negotiations continue to make progress, uncertainty over global oil supply security remains elevated due to the risk environment surrounding the Strait of Hormuz—an issue that many market participants appear to be overlooking.

Some social media users have even begun referring to Hormuz as "Schrödinger's Strait," and for good reason. The issue is no longer simply whether ships can pass through unhindered by Iranian forces or a potential US blockade. It is also about whether shipping companies, insurers, banks, and other participants in the oil trade can reliably track cargo movements and verify the safety of shipping routes.

Energy analytics firm Kpler recently argued that the risks stemming from the conflict involving the United States, Israel, and Iran go well beyond the question of whether the strait is technically open or closed. The ability to monitor tanker traffic has become a critical component in assessing overall risk.

Most media coverage and market analysis surrounding the Strait of Hormuz focuses on a simplified narrative built around two outcomes: open or closed. However, Kpler trade-risk analyst Ana Subasic warned last week that this framework is misleading because many other factors influence the situation.

She noted that oil cargoes require reliable tracking throughout their journey for both insurance and sanctions-compliance purposes.

"A vessel may be able to transit the strait," Subasic said, "but if its movements cannot be reliably monitored due to degraded or manipulated positioning data, the voyage record becomes questionable. Port-entry verification fails, risk mapping breaks down, and reconstructing the vessel's route becomes subject to dispute."

Such information is essential for all parties involved in oil shipments. Yet the market has largely ignored these concerns while focusing on the simplistic "open versus closed" narrative that directly influences oil futures prices.

In the physical oil market, however, these details often matter far more than whether the strait is technically open. This reality has frequently been reflected in significant divergences between futures prices and physical crude delivery prices.

The situation may become even more complicated in the months ahead.

Lloyd's List reported last week that Iran has introduced a mandatory insurance system for all vessels passing through the Strait of Hormuz, to be administered by a newly established Persian Gulf Strait Authority.

According to the report, insurance coverage will initially be provided free of charge, though that arrangement is not expected to last indefinitely.

The publication cited an Iranian document stating:

"Insurance will initially be provided free of charge to vessel owners, with all costs covered by the Islamic Republic of Iran. The Persian Gulf Strait Authority reserves the right to impose insurance fees in the future, at which point vessel owners will be required to purchase and renew the necessary coverage."

The new authority will also be the sole body authorized to issue transit permits and determine the routes vessels must follow while navigating the strait.

Lloyd's List quoted one tanker owner as saying: "This is madness. The whole situation has become chaotic."

The development illustrates just how complex the reality has become and why focusing solely on whether the strait is open or closed fails to capture the full picture.

As Subasic explained, the more important questions are: "Who is transiting the strait? When are they transiting? Under what level of risk? And does that risk create exposure for voyage stakeholders such as shipowners, charterers, insurers, banks, and cargo receivers?"

Before the initial US and Israeli strikes on Iran, this information was generally available to all market participants. Today, significant gaps have emerged in the data.

Insurers and banks are particularly uncomfortable with such information gaps, especially amid an active military conflict, a complex sanctions regime, and heightened maritime security risks.

The result is higher insurance costs, as uncertainty and limited visibility increase the expense of transporting oil cargoes.

Malaysia's New Straits Times recently reported that insurance costs for a very large crude carrier (VLCC) sailing from the Persian Gulf previously ranged between $150,000 and $225,000 per voyage before the conflict.

Following the outbreak of hostilities, those costs surged to between $5 million and $7.5 million per voyage.

Yet these dramatic cost increases may not represent the biggest long-term challenge. The more significant issue lies in the persistent information gaps highlighted by Subasic.

Those gaps are likely to keep uncertainty surrounding oil transportation through the Strait of Hormuz elevated for some time, regardless of how much progress peace negotiations make or what outcomes emerge in the coming weeks.

The fact that these additional risks have not been fully reflected in oil futures markets also provides further evidence of the growing disconnect between the physical oil market and the paper-trading market.

The Nasdaq Composite and S&P 500 fell to their lowest levels in more than a week on Tuesday, weighed down by sharp losses in semiconductor stocks as investors braced for a more hawkish Federal Reserve and increased scrutiny of debt-funded spending on artificial intelligence infrastructure.

If the selloff continues, the Nasdaq 100 could lose more than $1 trillion in market value.

Nvidia shares fell 3%, while Alphabet declined 1.2%. Chipmakers were hit particularly hard, with Intel, Marvell Technology, and Advanced Micro Devices dropping between 6.2% and 8.7%.

Memory chip makers Micron Technology and SanDisk, two of the best-performing stocks in the S&P 500 this year, plunged 12% and 13%, respectively.

The Philadelphia Semiconductor Index tumbled 7.3%, while the S&P 500 Information Technology Index fell 3.2%.

AI stocks pressured by spending and debt concerns

The latest selloff followed a weak session for major technology stocks, driven by concerns over massive spending on artificial intelligence infrastructure by big technology companies, particularly as valuations remain elevated.

"The AI trade has become one of the most crowded positions in global markets, and when everyone owns the same stocks, the exit door becomes very narrow very quickly," said Nigel Green, Chief Executive Officer of deVere Group.

At 9:35 a.m. ET, the Dow Jones Industrial Average was down 395.32 points, or 0.76%, at 51,317.39.

The S&P 500 fell 114.96 points, or 1.54%, to 7,357.83, while the Nasdaq Composite dropped 533.73 points, or 2.04%, to 25,632.87.

The interest-rate-sensitive Russell 2000 Index declined 1.7%, while the CBOE Volatility Index (VIX), often referred to as Wall Street's fear gauge, rose to its highest level in more than a week, gaining 2.92 points to 20.13.

Investors rotate into defensive sectors as SpaceX declines

Only four of the eleven major S&P 500 sectors traded higher, with consumer staples leading gains, up 1.2%.

As richly valued technology stocks came under pressure, investors increasingly shifted toward other areas of the market.

Previously beaten-down software stocks posted gains, with ServiceNow and Atlassian each rising 2.5%, while Adobe gained 1.4% and Salesforce added 1.2%.

Meanwhile, Elon Musk's SpaceX fell 4.8%, extending a decline that has erased more than $600 billion in market value over the past three trading sessions.

SpaceX, which began trading earlier this month, recently joined the list of large companies turning to the bond market to raise capital.

"Although SpaceX is not yet part of the Nasdaq indexes, its move into the bond market to finance heavy spending on artificial intelligence and infrastructure has revived concerns about whether major technology companies are overspending in these areas and becoming increasingly dependent on debt," said Ipek Ozkardeskaya, Senior Market Analyst at Swissquote Bank.

Rate hike bets weigh on markets ahead of inflation data

Traders have increased bets that the Federal Reserve could deliver a second interest rate hike by December, according to LSEG data, compared with expectations for only one 25-basis-point increase two weeks ago.

Those expectations have strengthened as markets price in a more hawkish monetary policy approach under new Federal Reserve Chair Kevin Warsh.

Despite the recent pullback, the S&P 500 remains on track for its strongest quarterly gain in six years, supported by the Middle East ceasefire and stronger-than-expected corporate earnings. However, concerns about stretched valuations in AI-related stocks have resurfaced.

Investors are now awaiting Micron Technology's earnings report on Wednesday, which could provide important clues about the outlook for memory chips and the broader AI sector after this year's powerful rally.

Markets are also closely watching Thursday's release of the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation gauge.

In market breadth, declining stocks outnumbered advancing stocks by 2.12-to-1 on the New York Stock Exchange and by 1.65-to-1 on the Nasdaq.

The S&P 500 recorded two new 52-week highs and three new lows, while the Nasdaq Composite registered 19 new highs and 95 new lows.