By Saqib Iqbal Ahmed
NEW YORK, May 7 (Reuters) – The dollar erased early losses to trade with a firm tone against most major currencies on Thursday as investors weighed hopes for a de-escalation in the Iran war.
The United States and Iran are edging toward a limited and temporary agreement to halt their war, according to sources and officials, with a draft framework that would stop the fighting but leave the most contentious issues unresolved.
Hopes of a deal between the two countries have buoyed global stock and bond markets since Wednesday, though sentiment took a knock on Thursday after the Wall Street Journal reported that Iran would not accept what it called an “unrealistic” American plan to reopen the Strait of Hormuz. About a fifth of the world’s oil and liquefied natural gas ordinarily passes through the Strait of Hormuz.
The euro was about flat on the day at $1.1748 after gaining 0.47% on Wednesday, while sterling was 0.1% lower at $1.35785 after rallying 0.4% the previous day.
“I think the market is still on edge,” said Marc Chandler, chief market strategist at Bannockburn Forex.
“The pendulum had swung pretty far toward ‘peace is at hand,'” Chandler added, noting that trading in the North American session was more circumspect about the prospects of a quick resolution to the conflict.
Oil prices swung between gains and losses in volatile trading on Thursday, ultimately settling lower after a report said the United States was considering restarting operations to escort commercial ships through the Strait of Hormuz as early as this week.
“While the Trump administration is clearly motivated to find an off-ramp in the conflict, there’s little to suggest that negotiating positions have converged. More negative and volatility-inducing headlines could land in the days and weeks to come,” said Karl Schamotta, chief market strategist at Corpay in Toronto.
YEN MOVES
The Japanese yen eased about 0.3% against the dollar a day after having appreciated sharply with speculation that Japanese authorities had again intervened in markets to buy their currency. The dollar was last at 156.79 yen.
Japan may have spent as much as 5.01 trillion yen ($32.06 billion) in its latest efforts to bolster its embattled currency, central bank data indicated on Thursday, signaling repeated bouts of intervention in markets.
Japan’s top currency diplomat, Atsushi Mimura, said separately on Thursday the country was not restricted on intervention.
U.S. Treasury Secretary Scott Bessent will meet Japanese Prime Minister Sanae Takaichi next week, and the Nikkei newspaper said they would discuss curbing speculative yen selling, among other issues.
