The U.S. dollar remained close to a 13-month high on Thursday as investors awaited key employment data for fresh clues about the Federal Reserve’s interest-rate outlook.
Meanwhile, the Japanese yen stayed near its weakest level in around 40 years. Its continued decline kept traders alert to the possibility of intervention by Japanese authorities.
US Dollar Holds Near Recent Highs
The U.S. Dollar Index traded near 101.39 points, remaining close to its strongest level since May 2025.
The greenback gained support after Federal Reserve Chair Kevin Warsh delivered hawkish comments at a European Central Bank forum on Wednesday.
Warsh emphasized that the Fed remained committed to returning inflation to its annual 2% target. He also suggested that investors expecting a rapid shift toward looser monetary policy could be disappointed.
Federal Reserve Rate Expectations Rise
Expectations that the Federal Reserve could raise interest rates at least once this year have increased.
Several policymakers reportedly signaled support for tighter monetary policy during the Fed’s June meeting. Warsh also said the central bank would assess whether another rate increase was necessary at its July meeting.
In addition, he defended the Federal Reserve’s independence from President Donald Trump, who has repeatedly called for lower interest rates.
Nonfarm Payrolls Report Takes Center Stage
Investors are now turning their attention to the June nonfarm payrolls report, due later on Thursday.
Economists expect the figures to show slower job creation. However, U.S. employment data has exceeded expectations for three consecutive months.
A stronger-than-expected labor market could give the Federal Reserve more room to raise interest rates. In contrast, weaker employment growth could reduce expectations for further monetary tightening.
Inflation Pressures Support a Hawkish Fed
Recent inflation data has also strengthened the case for higher interest rates.
Elevated energy prices and rising semiconductor costs have contributed to persistent price pressures across the U.S. economy.
The Federal Reserve must balance these inflation risks against labor-market conditions when deciding its next policy move.
Japanese Yen Remains Near 40-Year Low
The Japanese yen remained under heavy pressure, with the USD/JPY exchange rate trading around 162.53.
The currency has been among the biggest casualties of growing expectations for higher U.S. interest rates. A wider gap between U.S. and Japanese borrowing costs has made the dollar more attractive to investors.
Persistent yen weakness has also increased speculation that Tokyo could intervene again in the foreign exchange market.
Japan Considers Further Currency Intervention
Japanese officials are reportedly preparing a more targeted strategy aimed at limiting speculation and supporting the yen.
Tokyo previously spent tens of billions of dollars on currency intervention during late April and early May. However, those measures provided only temporary support.
A recent interest-rate increase by the Bank of Japan also failed to produce a lasting recovery in the currency.
Euro and Pound Move Higher
Other major currencies recorded modest gains against the dollar.
The euro rose around 0.1%, while the British pound advanced nearly 0.2%.
Despite these gains, the dollar remained well supported by expectations for tighter Federal Reserve policy.
Australian Dollar Pressured by Trade Deficit
The Australian dollar traded near a three-month low after Australia unexpectedly recorded its largest trade deficit in 11 years during May.
Lower exports of gold and iron ore were the main contributors to the shortfall.
Demand for Australian commodities weakened as global economic uncertainty increased because of interest-rate concerns and the conflict in the Middle East.
Asian Currencies Trade in Narrow Ranges
Elsewhere in Asia, the Chinese yuan strengthened slightly, with USD/CNY falling around 0.1%.
The currency remained within a narrow trading range following a series of cautious midpoint settings from the People’s Bank of China.
The Singapore dollar was broadly unchanged against the U.S. dollar.
Forex Markets Await Key US Data
The nonfarm payrolls report is likely to determine the dollar’s next major move.
Strong employment figures could reinforce expectations for a Federal Reserve rate hike. However, weaker data could pressure the dollar and reduce demand for further monetary tightening.
At the same time, traders will continue monitoring the yen for signs that Japanese authorities are preparing to intervene.
