* Dollar erases early losses against most major
currencies
* Markets await more clarity on US-Iran talks
* Yen weaker despite risk of Japanese intervention
* Norges Bank rate hike supports crown
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.
Analysts, however, remain cautious on the yen’s outlook.
“Without stronger BOJ follow-through via consecutive hikes
to address its behind-the-curve stance, the yen is likely to
remain weak in the near term,” said Masahiko Loo, senior fixed
income strategist at State Street Investment Management.
Repeated interventions raise the likelihood of broader
policy action in the June to July window, consistent with the
late 2024 playbook, Loo added.
RISKIER CURRENCIES SLIP
Norway’s crown strengthened after the central bank raised its
policy rate to 4.25% from 4% and said inflation was too high.
The dollar hit a fresh four-year low, before recovering ground
to trade little-changed on the day at 9.293 crowns.
The risk-sensitive Australian dollar eased 0.2% and
last fetched $0.7222, just below the four-year high it touched
on Wednesday.
The Swedish crown was about 0.2% weaker at 9.2508 per dollar
after Sweden’s Riksbank said the risk that the Iran war
would lead to higher inflation had increased somewhat, though it
kept its policy rate unchanged at 1.75%, as expected.
Leading cryptocurrency bitcoin slipped about 2% to
$80,017, but remained not far from the more than three-month
high touched in the previous session.
(Reporting by Saqib iqbal Ahmed; Additional reporting by Alun
John in London, Wayne Cole in Sydney and Ankur Banerjee in
Singapore; Editing by Kim Coghill, Clarence Fernandez, Andrew
Heavens, Will Dunham and Andrea Ricci)
