The dollar maintained its position on Thursday as markets anticipated crucial U.S. non-farm payrolls data. Meanwhile, the yen’s decline to 40-year lows against the dollar, coupled with thin trading in advance of a U.S. holiday, kept traders vigilant for potential intervention. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, eased 0.02% to 101.38. Thursday’s data is anticipated to reveal that U.S. employers added 110,000 jobs in June, while the unemployment rate is projected to remain unchanged at 4.3%, based on the median estimate from economists.

Federal Reserve Chairman Kevin Warsh stated on Wednesday that inflation expectations and price risks have diminished in recent weeks, while the ADP National Employment Report indicated that private employment increased, albeit at a rate below expectations. That being said, “If the payrolls data exceed market expectations, the dollar could accelerate higher on a rebound,” noted analyst Akihiko Yokoo. The dollar has been supported by increasing expectations of Federal Reserve rate hikes this year. A resilient labour market has strengthened the outlook for U.S. growth, following job gains that have surpassed expectations for the past three months. That has contributed to additional sources of dollar support, including the swift adoption of AI, which has facilitated the influx of capital into U.S. assets. The euro traded at $1.138 against the U.S. dollar while sterling edged 0.06% higher to $1.3279.

The Japanese yen has emerged as a significant victim of the dollar’s strength, placing Japan’s Ministry of Finance in a challenging predicament regarding potential intervention to bolster the currency. Overnight, the yen depreciated to 162.84 against the dollar, reaching a 40-year low and significantly exceeding the thresholds that had previously triggered intervention by Japanese authorities a few weeks prior. In the early trading session, it remained relatively stable at 162.50 per dollar. Traders perceive Friday’s U.S. public holiday as a possible opportunity for Tokyo to intervene, as reduced liquidity is expected to magnify the impact of any measures taken. Tony Sycamore, market analyst, indicated that the U.S. jobs data scheduled for release later today could act as a catalyst for intervention, contingent upon the outcome.

“A robust jobs print would provide fresh fuel for momentum and macro accounts to ​add to longs, ⁠pushing the pair toward the top of the trend channel 165–166 area,” he said in a note. “Conversely, a softer-than-expected report — for example, payrolls of around +65k with the unemployment rate ticking up to 4.4% or higher — would take some of the heat out of ⁠the recent ​rally.” In that scenario, he added, Japan’s finance ministry could intervene in thin trade ahead of the Fourth of July weekend to achieve greater effectiveness in their actions. The Australian dollar depreciated by 0.09% against the US dollar, settling at $0.6885, whereas the New Zealand dollar was valued at $0.5672.