Yen nears 40-year low, dollar gains as peace talks in doubt

The Japanese yen traded flat at 161.455 against the dollar, nearing its weakest level in two years, as doubts over Iran-US peace talks lifted the dollar index 0.3 percent to a one-year high of 101.07. The yen has found little relief despite the Bank of Japan's rate hike to a 31-year high and prior dollar-selling intervention, with analysts warning Japan may defend the 161.95 level using around 11.7 trillion yen in reserves. Fed funds futures now price a 39.6 percent probability of a 25-basis-point Fed rate hike in July, up from 8 percent a week ago.