The dollar remained close to a six-week high on Friday, following a turbulent overnight session marked by mixed signals regarding a U.S.-Iran peace deal. Nevertheless, investors clung to hopes of potential progress. Washington and Tehran maintained their divergent positions regarding Iran’s uranium stockpile and the control of the Strait of Hormuz. However, U.S. Secretary of State Marco Rubio noted that there had been “some good signs” in the discussions. The mixed messages created volatility in the markets overnight; however, currency movements remained relatively muted during early Asian trading on Friday as investors sought greater clarity. The dollar exhibited a slight increase, currently positioned at 99.24 against a basket of currencies, remaining close to its recent peak of 99.515 reached in the previous session, marking its highest level since April 7.

The euro experienced a slight decline of 0.03%, settling at $1.1613, whereas the pound remained unchanged at $1.3431. Sterling was poised to appreciate by 0.8% for the week, following a decline of over 2% the previous week attributed to political instability in Britain. The dollar gained further traction following data indicating a decline in U.S. weekly jobless claims last week, alongside a rise in manufacturing activity to a four-year high in May, highlighting the robustness of the world’s largest economy. “We’re coming to the end of week 12, we’re six weeks in the ceasefire, and I’m just not really that convinced we’re any closer to a resolution between the U.S. and Iran,” Tony Sycamore remarked regarding the Middle East conflict. “I still feel like the risks are for the U.S. dollar to go higher, because I really just don’t see a way out of this situation in the Middle East without them sort of needing to be more forceful.”

Elsewhere, the Australian dollar declined by 0.06% to $0.7145, while the New Zealand dollar was valued at $0.5873. The strength of the U.S. dollar and persistently high oil prices have resulted in challenges for the yen, which on Friday remained on the weaker side of 159 per dollar. It experienced a decline of 0.1%, settling at 159.09 per dollar.
The renewed weakness in the yen persists despite probable intervention from Tokyo just weeks ago aimed at stabilising the currency, prompting traders to remain vigilant for additional actions by Japanese authorities. “The yen has now given up more than half of its post-intervention gains… risks of further FX intervention are undoubtedly mounting, particularly as officials have indicated that there is no real limit as to how much, or how often, they can step in to protect the currency,” stated Matthew Ryan. Data released on Friday indicated that Japan’s core inflation has decreased to a four-year low in April, thereby complicating the Bank of Japan’s trajectory regarding interest rate increases.

Currencies in emerging Asia have faced significant pressure due to the global oil shock, compelling policymakers to adopt increasingly urgent and unconventional measures to stabilise their economies. Earlier this week, Indonesia announced a tightening of the state’s grip over the country’s abundant natural resources and mandated that all exporters of natural resources must store 100% of their export revenues in state-owned banks from June 1, in a move to support the plummeting rupiah. “The rupiah has been under tremendous pressure and thus these are measures aimed at directly intervening to stabilise the rupiah by increasing onshore U.S. dollar supply,” said Nigel Foo. “A currency’s value is a representation of a country’s fundamentals and that of Indonesia has clearly been deteriorating.