Yen struggles to hold intervention gains as dollar hovers near six-week lows
Currency markets traded cautiously on Thursday, with the Japanese yen giving up part of its recent intervention-driven rally and the U.S. dollar remaining close to a six-week low. Investor sentiment was restrained by uncertainty surrounding a proposed U.S.-Iran agreement and anticipation ahead of key U.S. payrolls data.
The yen was little changed at 157.71 per dollar in early trading after posting losses in the previous two sessions. Although it has retreated from Monday’s peak of 155.20, reached following suspected intervention, the currency remains well above last month’s multi-decade low near 164 per dollar.
Elsewhere, major currencies showed limited movement. The euro held steady at $1.1557, while sterling traded flat at $1.3469. The Australian and New Zealand dollars were also largely unchanged at $0.7056 and $0.5885, respectively.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, was steady at 99.65, lingering near its weakest level in six weeks as traders awaited fresh catalysts.
Market participants continued to monitor developments in the Middle East after reports emerged of a proposed agreement involving Iran and Oman aimed at resolving the U.S.-Iran conflict. According to Reuters, the proposal could grant Tehran authority over inbound shipping traffic through the Strait of Hormuz.
Washington has yet to comment officially on the reported plan. While President Donald Trump recently suggested an agreement to reopen the strategic waterway was close, U.S. officials have consistently maintained that they would not support any arrangement giving Iran control over access to the critical energy shipping route.
Oil markets reacted modestly, with Brent crude futures slipping 0.5% to $79.08 per barrel, hovering near levels seen following the interim peace accord between the United States and Iran in June.
Markets adopt wait-and-see approach as central banks and payrolls take center stage
Investors remained cautious, with markets largely in a holding pattern as traders assessed geopolitical developments and awaited fresh economic signals. According to Ray Attrill, Head of FX Strategy at National Australia Bank, the recent calm in oil markets has removed one of the key drivers that had been influencing asset prices in recent weeks.
Attrill noted that market participants are closely watching whether a U.S.-Iran agreement materializes, with uncertainty over the outcome keeping trading activity subdued.
BOJ minutes strengthen case for further tightening
Attention also turned to Japan after minutes from the Bank of Japan’s June policy meeting revealed policymakers discussed rising inflation risks that could warrant additional interest-rate increases, even as they lifted borrowing costs to their highest level in 31 years.
The discussion underscores growing concern within the BOJ about broader price pressures and reinforces expectations that another rate hike could come as early as September.
Although the yen surged as much as 5% against the dollar following intervention efforts by Tokyo and coordinated measures with Washington, the currency has struggled to maintain those gains.
A recent Reuters survey highlighted skepticism over the effectiveness of intervention alone, with nearly 95% of respondents saying currency market operations would not provide a lasting solution to yen weakness. Most respondents argued that further BOJ rate hikes would be necessary to support the currency over the longer term.
U.S. payrolls report expected to shape Fed outlook
Investors are now focused on Friday’s U.S. nonfarm payrolls report for further guidance on the Federal Reserve’s policy trajectory.
Recent data showed the U.S. services sector remained resilient in July despite rising input costs, though employment growth within the sector slowed. Economists surveyed by Reuters expect the upcoming report to show payrolls increased by 80,000 jobs in July, following a gain of 57,000 in June, while the unemployment rate is projected to remain unchanged at 4.2%.
Adding to market uncertainty, Federal Reserve Governor Lisa Cook indicated on Wednesday that she remains open to the possibility of additional rate hikes if inflation proves persistently elevated, signaling that policymakers are not yet ruling out further tightening despite signs of moderating labor-market momentum.
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