NEW YORK: The dollar fell against most major currencies on Wednesday as investors grew optimistic about a possible end to the Iran war, while a sudden jump in the Japanese yen to a more than two-month high put traders on alert for another round of official buying from Tokyo.
A source from mediator Pakistan who is familiar with the negotiations said Washington and Tehran were closing in on an agreement on a one-page memorandum to end the conflict.
The Pakistani source said a report earlier by US outlet Axios on the proposed memorandum was accurate. The Axios report had cited two US officials and two other sources familiar with the discussions.
“The more positive risk tone is really pressuring the dollar as folk buy into the optimism surrounding a potential US-Iran deal,” said Michael Brown, senior research strategist at Pepperstone in London.
“Obviously there could still be a long way to go on that front, but today’s headlines support the idea that the direction of travel remains towards de-escalation,” he said.
“In any case, participants are desperate to latch on to good news, so it’s a bit of a ‘buy risk first, ask questions later’ mindset creeping in,” said Brown.
The dollar index, which measures the US currency against six peers, was 0.4 percent lower at 97.941, after slipping to 97.623, its lowest since before the late February US strikes on Iran that started the conflict.
The euro was 0.6 percent higher at USD1.1755, while sterling was 0.6 percent higher at USD1.36125.
The rebound in risk appetite helped the Australian dollar extend gains to hit its strongest level in four years, rising 0.8 percent on the day to USD0.7237. The move follows the Reserve Bank of Australia’s decision the previous day to raise rates for the third time this year.
US private payrolls increased more than expected in April, the ADP’s national employment report showed on Wednesday.
The markets are now gearing up for the US non-farm payrolls release later this week, which will serve as a test of whether the economy remains resilient enough to keep the Federal Reserve’s monetary policy on hold, or whether a softening labour market could revive the case for interest rate cuts.
Leading cryptocurrency bitcoin rose 0.3 percent to USD81,852, its highest since January 31.
Against the yen, the dollar was 1.1 percent lower at 156.13 yen, after slipping as low as 155, around its weakest since February 24. The move triggered speculation of another round of intervention.
Japanese Finance Minister Satsuki Katayama earlier in the week warned against speculative moves in foreign exchange, after a brief jolt higher in the yen sparked speculation Tokyo had again intervened to support the currency.
“As I have said repeatedly, we will take decisive measures against speculative moves, in accordance with the statement signed between Japan and the United States last year,” Katayama told reporters after the Asian Development Bank’s annual meeting in Uzbekistan.
The Ministry of Finance of Japan could not be reached immediately for comment during a local holiday.
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