Dollar at 2-month high as Gulf hostilities flare, yen wobbles near intervention zone
Yen and U.S. dollar banknotes are seen in this illustration taken March 19, 2025. REUTERS/Dado Ruvic/Illustration
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HONG KONG, June 4 : The dollar clung to its recent strength near a two-month high on Thursday as fresh Gulf hostilities sapped risk appetite, while the Japanese yen hovered near the key 160 level that kept traders on intervention alert.
Iranian attacks on Kuwait damaged its airport and injured dozens on Wednesday, while the U.S. military carried out strikes near the Strait of Hormuz, complicating prospects for a diplomatic end to the war.
Although Israel and Lebanon agreed to a ceasefire, a broader peace deal remained elusive, keeping oil prices elevated and supporting demand for the safe-haven dollar.
The euro was 0.1 per cent stronger at $1.1609. A Reuters poll showed that the European Central Bank is set to raise its deposit rate to 2.25 per cent on June 11 to curb inflation. The British pound traded flat at $1.3427.
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The risk-sensitive Australian dollar was steady at $0.7129 after data showed Australia’s balance on goods trade swung back into surplus in April. The New Zealand dollar rose roughly 0.3 per cent to $0.5875, recovering from a one-week low.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was a shade higher at 99.45, hovering near the strongest level since April 7 in the previous session.
“The USD’s safe-haven status appears to be strengthening again” with oil prices and global yields rebounding on geopolitical tensions, said Sim Moh Siong, FX strategist at OCBC.
“There is no strong case for a bearish USD,” he said, adding the bank stays neutral and expects a firm but rangebound greenback.
On the data front, a survey on Wednesday showed a measure of prices paid by U.S. services businesses jumped to the highest level in nearly four years last month, cementing economists’ views that the Federal Reserve would hold interest rates unchanged well into next year.
The Japanese yen fetched 159.92 per dollar, off lows on Wednesday that pushed it past the critical 160-per-dollar mark for the first time since April 30, triggering verbal warnings from authorities.
The 160 level is widely seen in markets as a line in the sand for potential official intervention.
Bank of Japan Governor Kazuo Ueda cemented a June rate hike in a clear narrative pivot toward inflation fighting, as the Iran war-driven energy shock sharpens price risks and opens the door to more frequent increases in borrowing costs.
“The hawkish tone has strengthened further, including a clear expression of concern about behind-the-curve risk,” wrote Naohiko Baba, head of Japan research and chief Japan economist at Barclays. “We stick to our June rate hike call.”
Bitcoin hit a four-month trough and was last traded 1.3 per cent lower at $63,984. Ether hit the weakest since April 2025 before gaining 0.6 per cent to $1,791.
Source: Reuters
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