Currency markets were largely quiet on Thursday as investors held their breath ahead of a closely watched U.S. jobs report, while the Japanese yen’s dramatic decline to levels not seen in four decades kept traders on edge about possible government intervention.
The dollar index, which tracks the greenback’s value against a group of major currencies including the yen and euro, slipped just 0.02% to 101.38.
Economists surveyed by Reuters expect Thursday’s non-farm payrolls report to show U.S. employers added around 110,000 jobs in June, with the unemployment rate remaining at 4.3%.
Federal Reserve Chairman Kevin Warsh said Wednesday that inflation expectations and price risks have eased in recent weeks. Separately, the ADP National Employment Report showed private-sector hiring increased in June, though the gain fell short of forecasts.
Despite the cautious mood, Mitsubishi UFJ Bank senior analyst Akihiko Yokoo warned in a note that a stronger-than-expected jobs number could push the dollar higher. “If the payrolls data exceed market expectations, the dollar could accelerate higher on a rebound,” he wrote.
The dollar has been buoyed by growing expectations that the Federal Reserve will raise interest rates this year. A strong labor market has reinforced optimism about U.S. economic growth, particularly after job numbers beat forecasts for three consecutive months. The rapid expansion of artificial intelligence has also drawn investment into U.S. assets, providing additional support for the dollar.
The euro was trading at $1.138 against the dollar, while the British pound edged up 0.06% to $1.3279.
JAPAN ON WATCH FOR CURRENCY INTERVENTION
The Japanese yen has been among the hardest-hit currencies amid the dollar’s rise, placing Japan’s Ministry of Finance in a tough spot regarding whether to step in to prop up its currency.
During overnight trading, the yen fell as low as 162.84 per dollar — a 40-year low — surpassing the levels that previously prompted Japanese officials to intervene just weeks ago. In early Thursday trading, the yen was little changed at around 162.50 per dollar.
Many traders believe Friday’s U.S. public holiday could offer Tokyo a strategic opening to intervene, as reduced market activity would likely magnify the impact of any action taken.
Tony Sycamore, a market analyst at IG Australia, suggested that the U.S. jobs data could itself serve as the trigger. “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. “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 case, Sycamore added, Japan’s finance ministry might choose to intervene during the low-volume trading period ahead of the Fourth of July weekend to get “more bang for their buck.”
The Australian dollar fell 0.09% against the greenback to $0.6885, while the New Zealand dollar traded at $0.5672.
In digital currency markets, bitcoin dipped 0.2% to $59,934.94, and ether dropped 0.7% to $1,605.88.
