By Kevin Buckland
TOKYO, May 21 (Reuters) – The U.S. dollar hovered below a six-week peak on Thursday after pulling back on hopes that Washington was nearing a deal with Tehran to end the war in the Middle East.
The Australian dollar declined following a surprise rise in the unemployment rate to the highest point since 2021, which reduced the case for higher interest rates.
U.S. President Donald Trump on Wednesday said negotiations with Tehran were in the final stages, while also warning of further attacks if Iran does not agree to a deal.
The dollar, a safe haven, was steady at 158.99 yen after falling for the first time in eight sessions against the yen on Wednesday.
Bank of Japan policy board member Junko Koeda added a measure of support for the yen with hawkish comments on Thursday, saying in a speech that the central bank needs to continue to raise rates with underlying inflation already around a 2% target.
The euro was flat at $1.1623 after dipping to its weakest level on Wednesday since April 7 at $1.1583 before bouncing back.
The dollar index, which measures the currency against the euro, yen and four other rivals, was little changed at 99.161, down from a peak of 99.472 on Wednesday, the strongest level since April 7.
“The ‘safe haven’ flows reversed because of positive news about the Iran war,” wrote Joseph Capurso, head of FX at Commonwealth Bank of Australia, in a client note.
At the same time, “while the U.S. has domestic political incentives to seek peace, we would not be surprised if President Trump chooses military escalation to gain leverage in negotiations,” he said.
The Aussie slipped 0.3% to $0.7129 as traders pared back bets for Reserve Bank of Australia tightening this year.
Figures from the Australian Bureau of Statistics showed the jobless rate climbed to 4.5%, higher than analysts’ expectations for a steady 4.3%.
“Our call for the RBA to pause in its June policy meeting is now high-conviction,” Westpac economist Ryan Wells wrote in a research report.
“Still, the most immediate and pressing concern for the RBA is inflation. We continue to expect that the RBA will resume raising the cash rate when the size and pace of pass-through of the energy price shock is revealed.”
Sterling was steady at $1.3432.
Bitcoin edged higher to around $78,020.
(Reporting by Kevin Buckland; Editing by Kim Coghill, Jacqueline Wong and Thomas Derpinghaus)
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