Renewed strength in the US dollar pushed the Japanese yen back toward the critical 160-per-dollar level on Wednesday, prompting verbal warnings from Japanese officials and keeping traders on alert for possible intervention in the currency market, while fresh military developments in the Gulf boosted demand for the dollar as a safe-haven asset.

Renewed clashes in the Middle East

The United States said Iran launched ballistic missiles toward neighboring countries in the region, though no targets were hit, adding that US forces carried out strikes on Qeshm Island in response.

At the same time, diplomatic talks between Iran and the United States remain stalled, keeping a cautious mood across financial markets. The dollar typically benefits during periods of escalating regional tensions due to its safe-haven status and the relatively lower sensitivity of the US economy to energy-price shocks. In contrast, the yen tends to weaken when oil prices rise because of Japan’s heavy dependence on energy imports.

The critical level

The yen fell to the 160-per-dollar level on Wednesday, a threshold closely watched by markets after Japanese authorities previously intervened around that area. The decline erased gains achieved following Tokyo’s intervention last month, when authorities spent JPY11.7 trillion, equivalent to roughly $73 billion, to support the struggling currency.

Japanese Prime Minister Sanae Takaichi later said authorities stand ready to act and respond to foreign-exchange movements when necessary.

Following her remarks, the dollar eased slightly to JPY159.66.

“Terms-of-trade shock is the biggest factor weighing on the yen,” said Gustav Helgesson, macro strategist at SEB.

“If the Strait of Hormuz is reopened, I would expect some of the pressure driving yen weakness to fade,” he added.

Bank of Japan Governor Kazuo Ueda was scheduled to deliver a closely watched speech later on Wednesday, with investors looking for clues regarding the likelihood of an interest-rate increase in June.

Global currencies remain range-bound

Across broader currency markets, movements remained relatively subdued.

The euro slipped 0.1% to $1.1620, while sterling was little changed at $1.3460.

Data released on Tuesday showed eurozone inflation accelerated further last month, driven by higher energy and services costs, strengthening expectations that the European Central Bank will raise interest rates later this month.

The prolonged conflict in the Middle East and persistently elevated energy prices have led investors to increase bets on tighter monetary policy from major central banks this year, marking a sharp shift from the rate-cut expectations that dominated before the conflict began.

The Dollar Index, which tracks the US currency against a basket of major currencies, held steady at 99.29.

US labor market data in focus

US data released on Tuesday showed job openings rose at the fastest pace in five years during April, although the surge may overstate the underlying strength of the labor market.

Private-sector employment data is due later on Wednesday, ahead of Friday’s closely watched Nonfarm Payrolls report.

“The Nonfarm Payrolls report could be very important for the dollar,” said Helgesson of SEB.

“It could push the Federal Reserve further away from an easing bias and toward thinking about raising interest rates. I believe this could mark the beginning of a shift in market sentiment toward the dollar.”

Markets are currently pricing in roughly 18 basis points of US rate increases by December, with a full quarter-point hike priced in by March next year.

Swiss franc weakens as markets reassess positions

Elsewhere, the Swiss franc edged lower against both the dollar and the euro.

“Last year, the Swiss franc appeared to be one of the biggest beneficiaries, alongside gold and Bitcoin, of the dollar-debasement narrative,” said Chris Turner, Global Head of Markets at ING.

“But if markets become more confident that the Federal Reserve could actually move toward raising rates, we may see further unwinding of those dollar-bearish positions,” he added.

Gold prices fell by more than 1% in European trading on Wednesday and are on track for a second loss in three sessions, pressured by renewed military tensions between the United States and Iran, which pushed both the US dollar and oil prices higher across global markets.

Investors are awaiting additional key US labor market data in order to reassess expectations for the future path of Federal Reserve interest rates.

The Price

• Gold prices today: Gold fell 1.1% to $4,440.35 per ounce, from an opening level of $4,489.02, after reaching an intraday high of $4,496.76.

• At Tuesday’s settlement, gold posted a modest gain of 0.1%, after losing 1.2% in the previous session amid corrective selling and profit-taking from a two-week high of $4,595.33 per ounce.

US dollar

The US Dollar Index rose nearly 0.2% on Wednesday, extending gains for a third consecutive session and reflecting continued strength in the US currency against a basket of global currencies.

As is well known, a stronger dollar makes dollar-denominated gold less attractive to holders of other currencies.

The dollar’s advance comes amid heightened caution in financial markets, with investors reducing risk exposure following renewed military strikes between the United States and Iran and awaiting the outcome of ongoing peace negotiations aimed at ending the conflict and reopening the Strait of Hormuz.

Global oil prices

Oil prices rose by more than 3% on Wednesday, extending gains for a third consecutive session amid renewed Middle East tensions and concerns that the Strait of Hormuz could remain closed.

Developments in the Iran conflict

• The US military announced that Iranian missile attacks targeting Bahrain, Kuwait, and other regional targets had either failed or been intercepted.

• US President Donald Trump said he believes a framework agreement with Iran to extend the ceasefire could be reached within the coming week.

• Iran confirmed that it is still reviewing the final draft proposal and has not yet submitted its official response to the United States.

• US Secretary of State Marco Rubio stated that Iran has agreed to discuss aspects of its nuclear program that it had previously refused to negotiate.

• The United States continues to insist that sanctions relief will not be granted solely in exchange for reopening the Strait of Hormuz and must be tied to broader issues such as Iran’s nuclear program.

US interest rates

• Cleveland Federal Reserve President Beth Hammack said on Tuesday that the US central bank may need to raise interest rates soon if already elevated inflationary pressures continue to intensify.

• According to the CME FedWatch Tool, market pricing for a Federal Reserve rate hike at the December meeting increased from 35% to 58%.

• Markets continue to price a 98% probability that interest rates will remain unchanged at the June meeting, while the probability of a 25-basis-point rate cut stands at 2%.

• To reassess these expectations, investors will closely monitor upcoming US economic data and comments from Federal Reserve officials.

• ADP private-sector employment data for May will be released later today, weekly jobless claims are due on Thursday, and the official May employment report will be released on Friday.

Outlook for gold

Kelvin Wong, Senior Market Analyst for Asia-Pacific at OANDA, said: “The market is now looking at the possibility that the ceasefire with Iran may not hold, despite Trump’s efforts to secure a peace agreement.”

Wong added: “If we see further escalation, it could undermine any potential recovery in gold prices.”

SPDR Gold Trust

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, declined by 0.86 metric tons on Tuesday, marking a fourth consecutive daily decline. Total holdings fell to 1,028.00 metric tons, the lowest level since October 15, 2025.

The euro weakened in European trading on Wednesday against a basket of global currencies, resuming its losses against the US dollar and moving further away from two-week highs. The single currency remains under pressure due to risk aversion as investors assess developments in negotiations between Washington and Tehran, following confirmation from both sides that diplomatic contacts continue and discussions over the final terms of a potential agreement are ongoing.

Inflation accelerated across the Eurozone last month, driven by rising energy and services prices, reinforcing expectations that the European Central Bank will raise interest rates later this month.

The Price

• Euro exchange rate today: The euro declined 0.1% against the dollar to $1.1620, from an opening level of $1.1632, after reaching an intraday high of $1.1633.

• The euro ended Tuesday little changed against the dollar after losing 0.2% in the previous session as part of a corrective pullback and profit-taking activity from a two-week high of $1.1686.

US dollar

The US Dollar Index rose about 0.1% on Wednesday, extending gains for a third consecutive session and reflecting continued strength in the US currency against a basket of global currencies.

The advance comes amid persistent caution in financial markets, with investors reducing risk exposure while awaiting further developments in talks between the United States and Iran aimed at ending the conflict and reopening the Strait of Hormuz.

US-Iran talks

• US President Donald Trump stated that he believes a framework agreement with Iran to extend the ceasefire could be reached within the coming week.

• Iran confirmed that it is still reviewing the final draft proposal and has not yet submitted its official response to the United States.

• US Secretary of State Marco Rubio announced that Iran has agreed to discuss aspects of its nuclear program that it had previously refused to negotiate.

• The United States continues to insist that sanctions relief will not be granted solely in exchange for reopening the Strait of Hormuz, and that any agreement must also address key issues such as Iran’s nuclear program.

European interest rates

• Data released on Tuesday showed that inflation accelerated across the Eurozone last month, driven by higher energy and services costs linked to the fallout from the conflict involving Iran.

• Following the data, money markets increased the probability of a 25-basis-point ECB rate hike in June from 90% to 95%.

• Sources told Reuters that the European Central Bank is highly likely to raise interest rates in June, given inflation expectations that are moving toward an increasingly undesirable scenario.

The Japanese yen weakened in Asian trading on Wednesday against a basket of major and minor currencies, extending its losses for a third consecutive session against the US dollar and reaching the 160-yen threshold, placing investors on high alert for a possible intervention by Japanese monetary authorities to support the local currency and curb excessive movements in the foreign exchange market.

The US dollar maintained its gains against a basket of global currencies as markets assessed developments in negotiations between Washington and Tehran, following confirmation from both sides that diplomatic contacts remain ongoing and discussions over the final terms of a potential agreement are continuing.

The Price

• Japanese yen exchange rate today: The dollar rose by nearly 0.1% against the yen to ¥160.00, the highest level since April 30, from an opening level of ¥159.91. The session low was recorded at ¥159.82.

• The yen ended Tuesday down about 0.2% against the dollar, marking its second consecutive daily loss, amid rising tensions between the United States and Iran over the Strait of Hormuz.

The 160-yen threshold

Japanese authorities are closely monitoring movements in the currency market, particularly as the yen has fallen to the key ¥160-per-dollar level, which has long been viewed as a threshold that could trigger another intervention in the market.

According to Reuters sources, Tokyo intervened several times in late April and early May to halt the yen’s decline, but the currency’s recovery proved short-lived. At the time, the exchange rate reached ¥159.25 per dollar, its weakest level since April 30.

Japanese finance minister

Finance Minister Satsuki Katayama stated on Tuesday that authorities stand ready to intervene in currency markets if necessary, while declining to comment directly on recent yen movements.

Views and analysis

• Hirofumi Suzuki, Chief FX Strategist at Sumitomo Mitsui Banking Corporation, said that upward pressure on crude oil prices makes it easier for selling pressure on the Japanese yen to intensify.

• Suzuki added: “I do not believe there is a precise red line that would automatically trigger intervention, but the ¥160–¥161 per dollar range is likely being watched very closely by Japanese authorities.”

Japanese interest rates

• The Bank of Japan will meet on June 15–16 to assess the appropriate monetary policy tools for the world’s fourth-largest economy.

• Markets continue to price in roughly a 60% probability that the Bank of Japan will raise interest rates by a quarter percentage point at its June meeting.

• Investors are eagerly awaiting remarks from Bank of Japan Governor Kazuo Ueda later today for clues on whether the central bank intends to move forward with a rate hike in June.

US dollar

The US Dollar Index rose about 0.1% on Wednesday, extending gains for a third consecutive session and reflecting continued strength in the US currency against a basket of global currencies.

The advance comes as investors remain cautious and reluctant to take on risk while awaiting further developments in negotiations between the United States and Iran aimed at ending the conflict and reopening the Strait of Hormuz.

US-Iran negotiations

• US President Donald Trump said he believes a framework agreement with Iran to extend the ceasefire could be reached within the coming week.

• Iran confirmed that it is still reviewing the final draft proposal and has not yet submitted its official response to the United States.

• US Secretary of State Marco Rubio stated that Iran has agreed to discuss aspects of its nuclear program that it had previously refused to negotiate.

• The US side continues to insist that sanctions relief will not be granted solely in exchange for reopening the Strait of Hormuz, and that any agreement must also address core issues such as Iran’s nuclear program.