Key facts
- The dollar index was steady, trading at 101.38.
- Key U.S. non-farm payrolls data is anticipated, with economists expecting 110,000 jobs added in June.
- The Japanese yen reached a 40-year low against the dollar at 162.84.
- Traders are watching for potential currency intervention by Japanese authorities.
- A strong U.S. jobs report could strengthen the dollar, while a weak report might trigger yen intervention.
The dollar remained steady on Thursday as traders awaited crucial U.S. non-farm payrolls data, with the yen's significant weakening to a 40-year low against the greenback and anticipation of a U.S. holiday creating a tense trading environment.
The dollar index, a measure of the greenback's strength against a basket of major currencies, saw a slight decrease of 0.02% to 101.38. Economists polled by Reuters anticipate that U.S. employers added 110,000 jobs in June, maintaining the unemployment rate at 4.3%.
Federal Reserve Chairman Kevin Warsh commented on Wednesday that inflation expectations and price risks have recently eased. This sentiment was partially echoed by the ADP National Employment Report, which indicated a rise in private employment, though it fell short of expectations.
Analysts suggest that if the payrolls data surpasses market expectations, the dollar could see further gains. The dollar has been supported by increasing expectations of Federal Reserve rate hikes this year and a robust U.S. labor market, which bolsters the outlook for economic growth. The rapid adoption of AI has also attracted capital into U.S. assets, further supporting the dollar.
The euro was trading at $1.138 against the U.S. dollar, while sterling saw a modest increase of 0.06% to $1.3279.
ON GUARD FOR YEN INTERVENTION The Japanese yen has experienced a sharp decline amid the dollar's strength, placing Japan's Ministry of Finance in a challenging position regarding potential intervention to support the currency. The yen had previously fallen to 162.84 against the dollar, a 40-year low and above levels that previously prompted intervention. It was trading little changed at 162.50 per dollar in early trading.
Traders are considering the upcoming Friday U.S. public holiday as a potential opportunity for Tokyo to intervene, as thinner liquidity could amplify the impact of any action. Market analysts believe the U.S. jobs data could act as a trigger for intervention, depending on its outcome. A strong jobs report might encourage further dollar accumulation, potentially pushing the USD/JPY pair towards 165-166. Conversely, a softer-than-expected report, such as 65,000 jobs added with an unemployment rate of 4.4% or higher, could reduce upward pressure on the dollar. In such a scenario, the Japanese finance ministry might intervene in the thin pre-holiday market to maximize the effectiveness of their actions.
The Australian dollar fell 0.09% against the greenback to $0.6885, and the New Zealand dollar traded at $0.5672.
In cryptocurrencies, bitcoin decreased by 0.2% to $59,934.94, and ether declined by 0.7% to $1,605.88.