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

The yen's proximity to its weakest levels in four decades has prompted Japanese authorities to intensify efforts to support the currency and curb excessive foreign exchange market movements. Japanese Finance Minister Satsuki Katayama held an online meeting with US Treasury Secretary Scott Bessent to discuss potential policy measures for addressing the yen's historic weakness.

The Price

• Japanese yen exchange rate today: The dollar fell less than 0.1% against the yen to ¥161.48, from an opening level of ¥161.56. The session high was recorded at ¥161.64.

• The yen ended Monday down 0.2% against the dollar, touching a two-year low of ¥161.93, close to its 40-year low of ¥161.95.

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. The level is widely viewed as a red line that could prompt renewed intervention to support the currency.

Intensified efforts

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

According to Reuters sources, the discussions focused on proposed measures to address the yen's historic weakness, including the possibility of intervention in the foreign exchange market.

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

Views and analysis

Matt Simpson, Senior Market Analyst at StoneX, said: "Japan's Ministry of Finance may be concerned about the US dollar rising against the yen to its highest level of 2024."

He added: "The ministry may also feel unable to do much about it, as intervening against a hawkish Federal Reserve and strong US economic data could prove costly and ineffective."

Japanese interest rates

• Economic surveys indicate that the most likely baseline scenario is for the Bank of Japan to deliver an additional 25-basis-point interest rate increase in December.

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

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

Oil prices declined on Monday after the US Treasury Department authorized sales of Iranian crude through August.

Brent crude futures, the global benchmark for oil prices, fell 3.8% to $77.51 per barrel by 1:46 p.m. ET. US West Texas Intermediate crude futures also declined 2.56% to $74.64 per barrel.

The US Treasury issued a 60-day license permitting the production, delivery, and sale of Iranian oil. The authorization also allows imports of Iranian crude into the United States and permits payments to be settled in US dollars.

The move came after US Vice President JD Vance said that the United States and Iran had made "significant progress" during peace talks held over the weekend in Switzerland.

Roadmap toward a final agreement within 60 days

Mediators from Qatar and Pakistan said US and Iranian officials had agreed on a roadmap aimed at reaching a final agreement within 60 days.

The mediators added that the United States and Iran will continue technical negotiations throughout the week and will establish a high-level committee to oversee the mediation process.

The development follows US President Donald Trump's threat to resume military action against Iran, which raised concerns about the durability of the fragile temporary peace agreement reached last week.

Trump made the remarks on Sunday while Vance was meeting Iranian officials in Switzerland. The talks were overshadowed by Iran's announcement that it had once again closed the Strait of Hormuz, one of the world's most important oil shipping routes.

The negotiations, hosted at the Bürgenstock resort in Switzerland, marked the first talks since Washington and Tehran signed a memorandum of understanding last week aimed at ending the conflict and extending the fragile ceasefire for at least another 60 days.

The agreement included reopening the Strait of Hormuz and halting hostilities across the region, including in Lebanon. However, Iran accused Washington of failing to guarantee the ceasefire there and said the latest discussions would focus solely on implementing the memorandum rather than broader issues such as its nuclear program.

Current supply abundance may mask future oil market risks

David Roche of Quantum Strategy said Middle Eastern oil supplies are currently approaching pre-war levels when accounting for crude held in storage and aboard tankers.

However, he warned in a report released on Monday that the apparent supply surplus reflects inventory drawdowns rather than a recovery in production levels, leaving the market vulnerable once those stockpiles are depleted.

While oil prices previously rose on renewed Middle East tensions, Goldman Sachs noted that persistent supply disruptions could ultimately accelerate the shift toward electric vehicles, reducing long-term demand for crude oil and adding further downward pressure on oil prices.

British Prime Minister Keir Starmer resigned on Monday as leader of the governing Labour Party amid mounting political pressure. At the same time, Andy Burnham, one of the party's most popular figures, announced his candidacy to become the next prime minister and secured the backing of a potential rival.

Starmer said he would step down following increasing political pressure, revealing his decision after a weekend of reflection and after ministers indicated he had been considering what was best for the country.

Speaking to reporters outside 10 Downing Street, Starmer said: "The question my party is asking now is whether I am the best person to lead us into the next general election."

He added: "I have heard the answer from my party's parliamentary group, and I accept that answer in good spirit."

"Every decision I have made has been guided by putting the country I love first. For that reason, I will resign as leader of the Labour Party. I spoke with His Majesty the King this morning and informed him of my decision."

What happens next?

Nominations to choose a new Labour Party leader—and therefore Britain's next prime minister—will open on July 9.

Starmer said: "I will remain in office as prime minister until the selection process is complete, and I will do everything in my power to ensure an orderly transfer of power."

Andy Burnham, the former Mayor of Manchester, is widely viewed as the frontrunner to succeed Starmer after returning to Parliament following a by-election victory on Sunday. Burnham has previously run for the Labour leadership twice.

Less than two hours after Starmer's announcement, Burnham confirmed that he would seek the party leadership and the office of prime minister.

Burnham said: "Keir has given tremendous service to our country, and I thank him for his leadership and dedication during an extremely difficult period."

He added: "His decision marks the beginning of a transition period, and it is important that the process is conducted in an orderly and responsible manner. I will put myself forward as part of that process."

Former Health Secretary Wes Streeting, who had been expected to mount a leadership challenge, announced his support for Burnham. Streeting resigned from the Health Ministry last month in protest over Starmer's leadership.

It remains unclear whether Burnham will secure the leadership unopposed or face challenges from other Labour MPs.

Growing pressure on Starmer

Starmer's announcement came after days of intense speculation about his political future, with journalists gathering outside government headquarters awaiting clarification.

Junior minister Jackie Smith said earlier that Starmer had been thinking "very deeply" about his future and supported his decision.

The resignation marks a dramatic turn in Starmer's political career after he led Labour to a landslide victory in the 2024 election, ending 14 years of Conservative rule in Britain.

However, both major parties have lost support to the right-wing Reform UK party, which has led opinion polls for more than a year.

Labour also suffered another setback after losing the previously safe seat of Gorton and Denton in Manchester to the Green Party.

Why did Starmer lose popularity?

Starmer's government got off to a turbulent start after introducing an unpopular policy to remove winter fuel payments for millions of pensioners. The measure had not been included in Labour's election manifesto and was later reversed following widespread criticism.

He also abandoned plans to impose inheritance taxes on family farms, while his decision to increase payroll taxes and raise the minimum wage angered parts of the business community.

The government was further damaged by a series of controversies, including the resignation of former Deputy Prime Minister Angela Rayner last year over unpaid property tax liabilities.

Impact on markets

Investors began moving away from long-dated UK government bonds following Starmer's resignation announcement.

Asset managers and investment banks said they would avoid significant portions of the British debt market due to uncertainty surrounding Labour's leadership transition.

Long-term UK government bonds, known as gilts, are particularly sensitive to unexpected changes in government spending plans, and uncertainty over Starmer's successor has made them more vulnerable to volatility.

Jason Borbora-Sheen, portfolio manager at Ninety One, said he does not favor long-dated gilts "because of the uncertainty and greater fiscal sensitivity."

Markets are concerned that a Burnham premiership could lead to higher public spending and a shift toward more left-leaning policies.

In that scenario, investors may demand higher bond yields because of Britain's fragile fiscal position, leading to lower bond prices.

Investment bank Jefferies said it is avoiding long-dated UK government bonds and reducing exposure to sterling, expecting "further volatility" in the coming days.

Bond prices fluctuated sharply on Monday as political developments unfolded.

The yield on the benchmark 10-year UK government bond, which serves as a key measure of government borrowing costs, rose from 4.84% to 4.86% after Starmer announced his resignation.

However, it later fell back to 4.80%, the largest decline in Europe, after Wes Streeting endorsed Burnham, making the leadership contest appear closer to a foregone conclusion.

Mohit Kumar, economist at Jefferies, said: "Markets will closely watch Burnham's choice for Chancellor."

He added: "The concern is that Burnham's policies could be more left-leaning, and if the new Chancellor is not viewed as credible, that could raise concerns about deficits and borrowing."

Mike Bell, Head of Market Strategy at RBC BlueBay, said the firm is positioned for a weaker pound and prefers to "stay on the sidelines" regarding 10-year UK government bonds.

"It would not be surprising to see 10-year yields return to 5% if markets begin to question Burnham's credibility and Britain's fiscal trajectory," he added.

What happened to sterling and UK government bonds after the resignation?

The British pound and UK government bond prices remained under pressure on Monday following Starmer's resignation, which could pave the way for Andy Burnham to become Britain's seventh prime minister in a decade.

Sterling fell 0.27% to $1.3202, while remaining broadly stable against the euro at around £0.867 per euro.

Benchmark 10-year gilt prices were relatively stable, with yields rising one basis point on the day to 4.85%.

UK equity markets were largely unchanged after the announcement. The FTSE 100 slipped slightly, while mid-cap stocks declined around 0.5%.

Attention is now expected to shift toward Burnham's choice for Chancellor, who would succeed Rachel Reeves, whose recent efforts have focused on maintaining bond investors' confidence in Britain's ability to manage its public finances.

The S&P 500 and Dow Jones edged higher on Monday, supported by technology and financial stocks, while investors assessed developments in the latest round of negotiations between the United States and Iran.

Iran deal developments

Mediators said US and Iranian officials made "encouraging progress" during the first round of talks, which ended in Switzerland early on Monday, despite continued tensions over Lebanon and the Strait of Hormuz.

Memory chip stocks rose, with Micron Technology and SanDisk gaining around 3% each.

The Philadelphia Semiconductor Index also climbed 1.3% to a fresh record high. Intel shares rose 2%, while Nvidia gained 1%.

Among the 11 major sectors in the S&P 500, seven advanced, led by financial services, which gained 1%.

By contrast, communication services was among the laggards, falling 2.3%. Shares of Alphabet and SpaceX declined 3.8% and 7.9%, respectively, weighing on the Nasdaq.

Oil prices fell by as much as 2% after Washington and Tehran agreed during the talks on a roadmap to reach a final agreement within 60 days.

Hopes for a peace agreement helped Wall Street's three major indexes end last week with strong gains on Thursday, with the Nasdaq rising 2.4% as technology stocks continued to lead markets.

Dan Coatsworth, Head of Markets at AJ Bell, said: "Although markets have shown resilience in recent weeks amid hopes for a resolution to the Middle East conflict and avoiding a prolonged high-inflation environment, the conflict remains unresolved, meaning investors have not yet fully shifted into risk-on mode."

Index performance

At 9:53 a.m. ET, the Dow Jones Industrial Average rose 261.38 points, or 0.51%, to 51,826.08.

The S&P 500 gained 23.77 points, or 0.32%, to 7,524.35.

The Nasdaq Composite slipped 1.52 points, or 0.01%, to 26,515.06.

Optimism surrounding artificial intelligence has supported Wall Street's recent gains, while a relatively strong economy and hopes for an end to the four-month Middle East conflict have also broadly helped markets.

The next test for the rally will be Micron's quarterly results on Wednesday, after shares of the memory chipmaker have surged around 300% since the start of the year.

Inflation and the Fed

Investor attention this week is focused on Thursday's personal consumption expenditures (PCE) price index, the Federal Reserve's preferred measure of underlying inflation.

A stronger-than-expected reading could reinforce expectations for a more hawkish Fed stance after Chair Kevin Warsh emphasized the need to control inflation at last week's meeting.

Markets are currently pricing in a 25-basis-point interest rate hike by the Federal Reserve in September, according to LSEG data.

The two-year Treasury yield, which reflects short-term interest rate expectations, also rose to its highest level since the beginning of 2025 at 4.230% during the session.

Investors will also monitor remarks from Federal Reserve officials this week, including New York Fed President John Williams and Chicago Fed President Austan Goolsbee, for signals on monetary policy.

Among individual stocks, Apogee Therapeutics jumped nearly 47% after AbbVie announced it would acquire the company for $10.9 billion in cash. AbbVie shares rose 4.7%.

Advancing stocks outnumbered decliners by a ratio of 1.2 to 1 on the New York Stock Exchange and 1.49 to 1 on the Nasdaq.

The S&P 500 recorded 19 stocks at 52-week highs and 19 at 52-week lows.

The Nasdaq Composite recorded 103 stocks at 52-week highs and 74 at 52-week lows.