Yen declines ahead of US-Iran negotiations developments

The Japanese yen weakened in Asian trading on Monday against a basket of major and minor currencies, moving into negative territory against the US dollar and approaching its lowest level in four weeks, as caution and uncertainty dominate global markets ahead of further developments in peace negotiations between the United States and Iran.

Investors are also awaiting the Bank of Japan’s policy meeting later this month, when policymakers will reassess monetary tools and decide on interest rates amid differing views within the policy board regarding the central bank’s next move.

Price Overview

• Japanese yen exchange rate today: The dollar rose about 0.2% against the yen to ¥159.50, from Friday’s closing level of ¥159.23, and recorded an intraday low of ¥159.30.

• The yen ended Friday’s trading virtually unchanged against the dollar after gaining 0.2% in the previous session as part of a recovery from a four-week low of ¥159.65.

• During May, the yen lost 1.7% against the US dollar, marking its third monthly decline in the past four months, largely due to higher US Treasury yields.

US dollar

The dollar index rose more than 0.1% on Monday as part of a recovery from a two-week low, reflecting renewed strength in the US currency against a basket of global currencies.

The advance comes amid cautious market sentiment and reduced risk-taking as investors await the outcome of ongoing negotiations between the United States and Iran regarding an end to the war and the reopening of the Strait of Hormuz, one of the world’s most critical energy trade routes.

Global oil prices

Oil prices jumped more than 2% on Monday, rebounding from five-week lows as Israel expanded its offensive in Lebanon, reducing hopes for a ceasefire in the Middle East.

Latest developments in the Iranian war

• The United States and Iran remain without an agreement to end the war after Trump stated that he is not in a hurry to finalize a deal.

• The US president returned the proposed agreement draft with Iran to include “stricter” conditions related to the nuclear file, extending negotiations for several additional days.

• Donald Trump said on Friday that he would make a decision soon regarding the proposed agreement to extend the ceasefire with Iran.

• The mechanism for releasing frozen Iranian assets abroad remains one of the most complex points of disagreement between Washington and Tehran.

• Iranian Foreign Minister Abbas Araghchi confirmed that messages continue to be exchanged with Washington, noting that the success of the talks will ultimately be judged by their final outcome and whether the rights of the Iranian people are preserved.

Japanese interest rates

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

• Market pricing for a quarter-point interest rate increase at the June meeting currently stands at around 60%.

• Markets are eagerly awaiting a speech by Bank of Japan Governor Kazuo Ueda on Wednesday for clues on whether the central bank intends to proceed with a rate hike in June.

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

The ¥160 threshold

Japanese authorities continue to closely monitor movements in the local currency, particularly as the yen weakens toward the critical ¥160-per-dollar level, which has long been viewed as a threshold that could trigger renewed intervention in the foreign exchange market.

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