The U.S. dollar held steady just below a six-week high on Thursday, pulling back as optimism grew regarding Washington’s potential agreement with Tehran to address the ongoing conflict in the Middle East. The Australian dollar faced a downturn following an unforeseen rise in the unemployment rate, which has now reached its peak since 2021. This development lessened the case for increasing interest rates. U.S. President Donald Trump on Wednesday suggested that negotiations with Tehran were approaching a conclusion, while also warning of possible additional attacks if Iran does not secure an agreement.
The dollar, viewed as a safe haven, held steady at 158.99 yen after experiencing its first decline in eight sessions against the yen on Wednesday. Bank of Japan policy board member Junko Koeda strengthened the yen with her hawkish remarks on Thursday. In her speech, she underscored the necessity for the central bank to continue increasing rates, considering that core inflation is currently near the 2% target. The euro held firm at $1.1623 after dipping to its lowest level since April 7, recorded at $1.1583, before experiencing a minor rebound.
The dollar index, which assesses the currency in relation to the euro, yen, and four additional competitors, remained relatively stable at 99.161, a decline from its peak of 99.472 on Wednesday, marking the highest point since April 7. “The ‘safe haven’ flows reversed due to positive news regarding the Iran war,” stated Joseph Capurso. At the same time, “while the U.S. has domestic political incentives to seek peace, we would not be surprised if President Trump chooses military escalation to gain leverage in negotiations,” he stated.
The Aussie experienced a decline of 0.3%, settling at $0.7129, as market participants adjusted their expectations regarding potential tightening measures by the Reserve Bank of Australia for the current year. Figures from the Australian Bureau of Statistics indicated that the jobless rate increased to 4.5%, surpassing expectations for a stable 4.3%. Nonetheless, the RBA’s most pressing and critical concern continues to be inflation. We uphold our forecast that the RBA will resume raising the cash rate as the extent and rapidity of the energy price shock’s effects become evident. Sterling maintained its position at $1.3432.