The Pound edged higher on Thursday after hitting a three-week low in the previous session, supported by a sharp rally in the Yen that weighed on the US Dollar, while easing oil prices also provided some relief.

Sterling rose 0.1% to $1.35, after falling to $1.348 on Wednesday as the safe-haven Dollar strengthened following renewed US strikes against Iran.

However, the Yen’s sharp rise, which analysts attributed to growing expectations of a Bank of Japan rate hike, while also warning of possible official intervention, triggered a broad decline in the Dollar on Thursday.

Meanwhile, oil prices eased from a more than one-month high after a relatively calmer day in the Middle East, with Brent crude falling 1% to around $95 a barrel.

The Pound was little changed against the Euro, with the single currency trading at 85.93 pence, Reuters reports.

In addition, the sell-off in global bond markets also eased on Thursday after pushing the UK’s benchmark 10-year gilt yield to its highest level since 2007 in the previous session. The yield was down more than 3 basis points.

The rise in government bond yields, which serve as a gauge of borrowing costs, has reduced some of the government’s fiscal headroom under its rules. That presents another challenge for new Prime Minister Andy Burnham as Chancellor John Healey prepares to deliver the October budget.

Markets have also increased their expectations for rate hikes globally, with the US-Iran conflict pushing energy prices higher again. Traders are now fully pricing in a Bank of England rate increase by the end of the year, followed by another hike by March.

Sterling has edged slightly higher against the Dollar this year, while the Euro has fallen by more than 1%, as signs emerge that the UK economy is performing better than previously expected.