FOREX-Yen and dollar drift on Iran deal concerns, payroll jitters

Currency markets remained cautious on Thursday, with the Japanese yen retracing intervention gains and the dollar near six-week lows, amid concerns over a proposed U.S.-Iran deal and U.S. payroll data.

Currency markets ‌drifted ​on Thursday with the Japanese yen retracing some intervention-led gains and the dollar stuck near six-week lows, as concerns about a proposed U.S.-Iran deal and jitters about impending U.S. payroll data left traders cautious.

The yen was flat at ‌157.75 per dollar following modest declines for two straight sessions. It has now given back some intervention-driven gains after touching 155.20 per dollar on Monday, but remains well off a multi-decade low of about 164. The euro was steady at $1.1548 and sterling traded flat at $1.3456. The New Zealand dollar and the Australian dollar were 0.2% ‌weaker, last trading at $0.5875 and $0.7043, respectively.

The dollar index, which tracks the U.S. currency against six major peers, was little changed at 99.70, continuing to ‌struggle for direction 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 U.S.-Iran conflict could give Tehran control over inbound traffic through the Strait of Hormuz.

However, there was no immediate U.S. comment on the proposal. President Donald Trump ⁠has said ​a deal to reopen the strait was ⁠imminent, but U.S. 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 futures were down 0.3% ⁠at $79.25 a barrel, near the levels last seen when the U.S. and Iran signed an interim peace agreement in June.

"The market's very much in sort of watch and wait ​mode," Ray Attrill, head of FX strategy at National Australia Bank, said in a podcast. "We haven't got the oil market volatility that has ⁠really been the key driver of most markets in recent days and weeks," he said, adding that markets were waiting to see whether a deal would be struck at all.

PAYROLL DATA IN FOCUS Investors ⁠are ​now also turning their focus to U.S. 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 Reuters survey of economists expected July's employment report on Friday to show nonfarm 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%. 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 U.S. economy.

Meanwhile, San Francisco Fed President Mary Daly said she was "completely supportive" of last week's decision ‌to hold rates steady and ‌added that more data is needed before September's meeting.