Currency markets traded cautiously on Thursday as the Japanese yen gave back part of its intervention-driven gains, while the U.S. dollar remained near a six-week low.

Investors are focused on two key factors: developments surrounding a potential agreement involving the Strait of Hormuz and the upcoming U.S. employment report.

Yen Gives Back Some Intervention-Led Gains

USD/JPY traded around 157.75, after the yen strengthened to 155.20 per dollar earlier in the week following coordinated intervention. Although the currency has weakened again, it remains well above its multi-decade low near 164 per dollar.

Other major currencies were largely stable:

• EUR/USD held near 1.1548

• GBP/USD traded around 1.3456

• NZD/USD fell 0.2% to 0.5875

• AUD/USD declined 0.2% to 0.7043

The U.S. Dollar Index was little changed at 99.70, continuing to struggle for direction after touching a six-week low on Monday.

Markets Await Developments Around the Strait of Hormuz

A proposal between Iran and Oman aimed at helping end the U.S.-Iran conflict could reportedly give Tehran control over inbound traffic through the Strait of Hormuz.

However, the United States has not issued an immediate response. Washington has repeatedly stated that it would not accept Iranian control over the world’s most important shipping route for energy supplies.

Brent crude slipped 0.3% to $79.25 per barrel, reflecting a wait-and-see market rather than a clear shift in direction.

U.S. Payroll Data Moves Into Focus

Investors are also awaiting the July employment report for further clues about the Federal Reserve’s interest-rate path.

Market forecasts suggest:

• Nonfarm payrolls increased by 80,000 jobs, after rising by 57,000 in June

• The unemployment rate remained unchanged at 4.2%

A weaker-than-expected report could pressure the dollar and reduce expectations for a rate increase. Stronger data, however, could reinforce the view that the Fed needs to maintain a hawkish policy stance.

Fed Officials Remain Divided

Federal Reserve Governor Lisa Cook said she was open to the possibility that the central bank may need to raise short-term interest rates if inflation remains too high.

Meanwhile, San Francisco Fed President Mary Daly said she fully supported last week’s decision to keep rates unchanged and emphasized that more data would be needed before the September meeting.

Conclusion

The yen and the U.S. dollar remain without a clear direction as markets await further developments in Iran-related negotiations, the Strait of Hormuz and the U.S. employment report.

In the near term, labor-market data will be a key factor shaping expectations for Federal Reserve policy and the next move in foreign-exchange markets.

Source: Reuters