The Japanese yen fell in Asian trading on Tuesday against a basket of major and minor currencies, extending its losses for a seventh consecutive session against the US dollar and approaching its lowest level in three weeks, as investors assessed the latest developments surrounding the Iran war, particularly after Trump delayed a military strike on Iran following mediation efforts by major Gulf leaders.

Government data released in Tokyo today showed that Japan’s economy grew better than expected in the first quarter of this year, strengthening expectations that the Bank of Japan could raise interest rates when it meets in June.

Price overview

• Japanese yen exchange rate today: The dollar rose against the yen by 0.15% to ¥159.03, from today’s opening level of ¥158.79, while recording a session low of ¥158.71.

• The yen ended Monday trading down by less than 0.1% against the dollar, marking its sixth consecutive daily loss, and touched a three-week low of ¥159.08 amid fears of renewed conflict with Iran.

US dollar

The US Dollar Index rose 0.15% on Tuesday, resuming gains that paused temporarily yesterday and moving back toward a six-week high, reflecting renewed strength in the US currency against a basket of global currencies.

The dollar gained support from safe-haven demand, as market sentiment remains fragile despite President Donald Trump’s decision to delay a military strike on Iran following Gulf mediation efforts, while awaiting tangible progress in peace talks being conducted under Pakistani sponsorship.

Latest developments in the Iran war

• Trump stated on the Truth Social platform that he agreed to postpone the planned Tuesday attack on Iran following intensive contacts with Gulf leaders in order to grant the Pakistani mediation additional time.

• Trump instructed the Department of Defense (Pentagon) to remain on full alert and prepared to proceed with military action “from every direction” if negotiations fail.

• The White House insists that any final agreement must include a strict and fundamental condition preventing Iran entirely from obtaining a nuclear weapon.

• Tehran officially submitted an updated 14-point response to the US administration through the Pakistani mediator. Iran is demanding a long-term truce, international guarantees, and the lifting of the naval blockade.

• US officials said the new Iranian proposal is “insufficient and does not include meaningful improvements,” although Trump later described the ongoing negotiations as showing “very positive progress” following the decision to delay the strike.

• The United States is demanding a 20-year freeze on Iran’s nuclear program, while Tehran continues to reject the proposal.

New warnings

Japanese Finance Minister Satsuki Katayama told reporters on Monday that Japan remains ready to act against excessive volatility in the foreign exchange market at any time, while ensuring that any intervention to support the yen through dollar selling does not lead to higher US Treasury yields.

Japanese economy

Data released today in Tokyo showed that Japan’s economy expanded at an annualized rate of 2.3% in the first quarter of this year, beating market expectations for 1.7% growth, after the world’s fourth-largest economy recorded growth of 1.3% in the fourth quarter of last year.

Japanese interest rates

• Following the above data, markets increased pricing for the probability of a quarter-point interest rate hike by the Bank of Japan at its June meeting from 80% to 85%.

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

Chicago grain and soybean futures rallied sharply on Monday after the White House announced that China had pledged to purchase at least $17 billion worth of US agricultural products over the next three years.

The most active wheat contract on the Chicago Board of Trade rose 3.2% to $6.56-1/4 per bushel by 10:40 GMT. Corn also climbed 3.1% to $4.70 per bushel, while soybeans gained 2% to $12.01 per bushel.

The US administration said China made the commitment during meetings between President Donald Trump and Chinese President Xi Jinping last week, according to a White House fact sheet released Sunday.

The White House clarified that the $17 billion figure does not include soybean purchase commitments China made in October 2025, adding that markets had not expected Beijing to raise its soybean import targets above 25 million metric tons.

A Beijing-based analyst said the White House announcement suggests China may increase purchases of US corn, wheat, sorghum, and meat products in addition to soybeans.

Despite this, Chinese agricultural imports from the United States still face an additional 10% tariff following rounds of retaliatory duties imposed last year, which sharply reduced trade between the two countries.

“The agreement with China remains vague and lacks details, and China has not fully honored similar commitments in the past,” a European trader said. “But it’s a large number, and there are hopes China could return to the massive pace of US grain and soybean purchases seen before the trade dispute.”

China’s Ministry of Commerce said Saturday that both sides are seeking to strengthen bilateral trade, including agricultural products, through measures such as reducing reciprocal tariffs on a range of goods, though it did not specify which products would be included.

Meanwhile, elevated US wheat prices have prompted some American buyers to import wheat from Poland, according to European traders on Monday.

Oil prices climbed on Monday after a report stated that the United States considers Iran’s latest proposal to end the war insufficient.

Global benchmark Brent crude futures for July delivery rose more than 2% to settle at $112.10 per barrel. US West Texas Intermediate crude futures for June delivery also gained nearly 3% to close at $108.66 per barrel.

An Iranian Foreign Ministry spokesperson said negotiations are still ongoing through Pakistan, adding that both Washington and Tehran have submitted their latest comments on the Iranian proposal.

Axios quoted a senior US official as saying the proposal does not represent a “meaningful improvement” and remains insufficient to secure an agreement. The report also said that President Donald Trump is expected to meet with his national security team on Tuesday to discuss military options.

Meanwhile, Iran’s Tasnim news agency reported that the United States had offered temporary relief on oil sanctions, a key Iranian demand. However, a US official told CNBC that the Iranian claims were inaccurate.

Over the weekend, Trump warned that Iran “better move” toward reaching a deal, saying delays in reopening the Strait of Hormuz could lead to renewed military conflict. The president’s comments came as analysts pointed to record declines in global oil inventories.

“Iran’s clock is ticking, and they better move fast or there will be nothing left,” Trump wrote Sunday on Truth Social, adding that “time is running out.”

Despite a fragile ceasefire reached in April, tensions remain high between Iran and the United States, with Tehran continuing to keep the Strait of Hormuz largely closed while the Trump administration maintains a blockade on Iranian ports.

Before the war began, nearly one-fifth of global oil and gas supplies passed through the strait.

In its latest monthly report, the International Energy Agency warned that global oil inventories are falling at a record pace as the Strait of Hormuz remains closed, saying that “the rapid decline in reserves, combined with ongoing disruptions, could signal further price spikes ahead.”

According to a report issued last week by UBS, inventories could approach historic lows of 7.6 billion barrels by the end of May if oil demand remains at current levels.

Europe faces growing oil shortage risks

Jeff Currie, co-chairman of commodities exchange Abaxx, told CNBC’s Squawk Box Europe that concerns over oil supplies are likely to intensify as inventories continue to decline.

“Anyone actually operating in this industry will tell you the situation is bad. The Iranians want to inflict damage. The issue here is not the price of oil, but its availability,” Currie said.

“There’s no actual shortage yet, but Europe could face one by the end of the month. The market isn’t overly worried right now, but with the UK’s late-May holiday and the US summer driving season approaching, we’ll begin to feel the strain,” he added.

The US Federal Reserve is preparing to enter a new phase after former governor Kevin Warsh secured a narrow and deeply divisive Senate confirmation vote of 54 to 45, succeeding Jerome Powell as chairman of the central bank.

Warsh is considered a close ally of US President Donald Trump and now faces a difficult task that requires balancing complex policies and conflicting objectives, while coming under intense pressure from Trump to cut interest rates despite rising inflation, partly driven by higher oil prices.

Oil prices climbed again on Monday following a sharp warning from Trump directed at Iran, after reports emerged of attacks targeting ships and infrastructure in the Gulf, reigniting fears of renewed fighting in the Middle East.

Brent crude futures for July delivery rose 1.5% to $110.72 per barrel by 7:25 a.m. Eastern Time, while US West Texas Intermediate crude gained 1.3% to $106.81 per barrel.

Trump has made it clear that Warsh’s appointment was intended to secure a more accommodative monetary policy. However, persistently elevated inflation data, combined with possible resistance from other Federal Reserve governors, may limit Warsh’s ability to deliver on the president’s wishes.

Trump wants rapid interest rate cuts to strongly stimulate investment and economic growth. Since December, the Federal Reserve has kept interest rates unchanged between 3.5% and 3.75%, a level officials view as slightly restrictive for economic activity.

However, the consumer price index rose 3.8% year-over-year in April, driven by geopolitical tensions in the Gulf and the implementation of tariffs. As a result, futures markets have completely ruled out the possibility of rate cuts during 2026, while some analysts now expect the next move to be a rate hike.

Warsh is also likely to face opposition from other officials within the central bank. Jerome Powell has decided to remain a member of the Board of Governors, making him a counterweight to any potential political interference.

During recent meetings, four policymakers dissented from official decisions, with three of them explicitly pushing to remove any language suggesting future rate cuts remained possible.

Some hawkish members are already demanding that the Federal Reserve clearly state that additional rate hikes remain on the table, placing Warsh under major pressure ahead of his closely watched first appearance in June.

If the new Federal Reserve chairman is still looking for what he once described as a “good family argument” over monetary policy, he is likely to find one if he maintains his pro-rate-cut stance.

With inflation accelerating and Treasury yields rising, Warsh will face a Federal Open Market Committee that appears unwilling to ease monetary policy. In fact, several officials recently stressed the importance of keeping the option of rate hikes alive.

If former governor Stephen Miran appeared isolated when he called for rate cuts, then an attempt by the Federal Reserve chairman himself to challenge the broader policymaking body and push for easing would attract even greater attention.

Observers who have followed Warsh for years, from his time as a governor to his later public criticism of central bank policies, believe he will strongly advocate for lower interest rates. However, they argue his core problem is that he may lose that debate, at least in the short term, creating significant communication challenges with markets.

“I saw him at work,” said Loretta Mester, former president of the Cleveland Federal Reserve, who previously worked with Warsh. “He based his decisions on his view of the economy, and even his arguments in favor of lower rates were tied to his interpretation of structural changes in the economy.”

“But I don’t think he can convincingly make those arguments right now because we have a real inflation problem,” she added.

Elevated inflation is expected to become the first and biggest political challenge facing Warsh.

Officially, Warsh has embraced the Trump administration’s narrative that the current wave of price increases is temporary and will fade once the Iran conflict ends and other disinflationary forces such as productivity improvements return.

However, these arguments are now facing a far more skeptical audience, particularly as inflation has climbed to its highest levels in years.

Warsh used the phrase “family disagreement” during his Senate confirmation hearing, a remark that many central bank watchers believe could later haunt him, alongside his previous sharp criticism of the Federal Reserve.

Sharp divisions inside the Federal Reserve

At the latest Federal Open Market Committee meeting in late April, three members voted against the official policy statement.

The disagreement centered on a sentence interpreted as signaling that the next move could be a rate cut, stating that the committee “will carefully assess incoming data, the evolving outlook, and the balance of risks when considering the extent and timing of any additional adjustments to the target range.”

However, this very disagreement may offer Warsh an opportunity to quickly leave his mark on the central bank by persuading other members to remove such language, in line with his repeated criticism of so-called “forward guidance,” while preserving flexibility for future policy options.

“There’s a lot of independent thinking within the committee,” said Lou Crandall, chief economist at Wrightson ICAP. “Kevin Warsh is fortunate to have significant experience, and family disagreements often lead to constructive outcomes.”

“He can frame this not as monetary tightening, but as a shift toward a more neutral communication approach,” he added.

A possible confrontation with Trump

But Warsh’s problems are unlikely to end there.

Trump clearly nominated him because he wants lower interest rates. If Warsh fails to deliver that outcome, the tense relationship previously seen between Trump and Jerome Powell could reemerge, including personal attacks and an unprecedented clash between the White House and the central bank.

Even so, people familiar with the committee’s internal workings believe Warsh is unlikely to emerge from meetings saying he tried to cut rates but failed to convince other members, as doing so would undermine his authority as chairman.

“Part of the chairman’s job is building consensus within the committee,” Loretta Mester said.

She added that previous Federal Reserve chairs such as Ben Bernanke, Janet Yellen, and Jerome Powell regularly communicated with members ahead of meetings to gauge their positions in advance, explaining that “consensus-building is a core part of how the committee functions.”

Additional communication challenges

Beyond the battle over interest rates, Warsh faces additional challenges related to how the Federal Reserve communicates with markets.

He has previously criticized not only forward guidance, but also the “dot plot” showing officials’ interest rate expectations, while also expressing reservations about holding a press conference after every meeting — a practice introduced by Jerome Powell instead of limiting conferences to quarterly appearances.

Bill English, the Federal Reserve’s former head of monetary affairs and now an economics professor at Yale University, said he worked with Warsh and considers him “good at dealing with people,” adding that he expects him to seek “reasonable consensus” on key issues.

“From my experience with him when he was a governor, he doesn’t strike me as someone who wants to fight the committee,” English said. “I think he’ll try to lead through consensus-building and gradually move the committee through arguments and economic data.”