US dollar ticks up as markets await Iran deal news, look towards payrolls

[LONDON] Currency markets drifted on Thursday (Aug 6) with the Japanese yen retracing some intervention-led gains and the US dollar edging away from a six-week low, as investors awaited more details on a proposed US-Iran deal and looked ahead to Friday’s US jobs report.

The yen was a touch softer at 157.85 per dollar following modest declines over the past two sessions. It has now given back some intervention-driven gains after touching 155.20 per dollar on Monday, but remains well off a multidecade low of almost 164 reached in July.

“Stretched positioning, the involvement of the US, and the fact that the yen is historically undervalued all suggest that the current round of intervention has a better chance of propping up the yen for longer than some previous ones,” said Jonas Goltermann, chief markets economist at Capital Economics.

The euro was down about 0.1 per cent at US$1.1542, and sterling fell a similar amount to US$1.3460.

The dollar index, which tracks the US currency against six major peers, was up 0.1 per cent at 99.77, edging higher after it hit a six-week low on Monday.

Markets remained watchful as tensions continued to play out in the Gulf, after Reuters reported a proposed deal between Iran and Oman to help end the US-Iran conflict could give Teheran control over inbound traffic through the Strait of Hormuz.

However, there was no immediate US comment on the proposal. US President Donald Trump has said a deal to reopen the strait is imminent, but US officials have repeatedly insisted they would never agree to Iran controlling access to the world’s most important trade route for energy supplies.

Brent crude inched higher to around US$80.20 a barrel, although prices remain well below the almost US$100 per barrel hit in July when US-Iran tensions flared.

“We haven’t got the oil market volatility that has really been the key driver of most markets in recent days and weeks,” Ray Attrill, head of FX strategy at National Australia Bank, said in a podcast.

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Yen struggles to keep intervention gains; US dollar near 6-week low on Iran deal concerns, payroll jitters

Investors are now also turning their focus to US payroll data that could provide more clues on the Federal Reserve’s interest rate path, after data showed the country’s services sector stayed strong in July while services-sector employment slowed.

A divided Fed left rates unchanged last month, but chair Kevin Warsh delivered an unwavering commitment to bring inflation lower, leaving the door open to a possible rate hike in September.

“Any data release after the Fed meeting in July is just very important,” said ING FX strategist Francesco Pesole.

“Tomorrow’s payrolls could be pretty big for dollar-yen. If it’s a hot print, then you would probably start to see a new build-up of speculative longs on dollar-yen.”

A Reuters survey of economists expected July’s employment report on Friday to show non-farm payrolls increased by 80,000 jobs in July after rising 57,000 in June. The unemployment rate is forecast to hold steady at 4.2 per cent.

Fed Governor Lisa Cook said on Wednesday that she was open to the idea that the central bank may need to raise its short-term interest rate target to deal with “too-high” levels of inflation in the US economy.

San Francisco Fed president Mary Daly said she was “completely supportive” of last week’s decision to hold rates steady and said more data is needed before September’s meeting. REUTERS