Dollar rises on Iran deal doubts ahead of US jobs report

The US dollar strengthened against the yen and euro on Friday, extending gains from the previous session as growing skepticism over an Iran peace deal boosted safe-haven demand ahead of a closely watched US employment report.

Gulf Tensions and the Strait of Hormuz

The greenback's rise came as doubts mounted over a proposed agreement between Iran and Oman that Reuters reported could give Tehran control over inbound shipping traffic through the Strait of Hormuz. The proposal followed days of intensive diplomacy — Iran's foreign ministry said earlier in the week that it was in the "final stages" of drafting an agreement with Oman on a shipping route through the strait, while President Donald Trump declared a broader deal was imminent.kfgo+2

US officials, however, have repeatedly insisted they would never agree to Iranian control of access to the world's most important energy trade route. The US did not immediately comment on the Iran-Oman proposal, and the lack of progress weighed on market optimism.sabcnews+1

"USD was supported by higher oil prices following news that a deal between the US and Iran to reopen the strait is further away than hoped," said Kristina Clifton, an economist at Commonwealth Bank of Australia.kfgo

Brent crude settled up more than $3 on Thursday before rising further on Friday, heightening inflation concerns and pushing Treasury yields higher.freemalaysiatoday

Fed Signals and the Dollar's Path

The dollar also drew support from a Financial Times News Corp ↘ 3.58% report citing sources close to Federal Reserve Chair Kevin Warsh that pointed to the potential for a September interest rate hike, depending on incoming data. A divided Fed left rates unchanged last month, but Warsh has signaled an unwavering commitment to bringing inflation down.egyptindependent+2

Clifton noted her expectation that "the Fed to wait until December before starting a modest tightening cycle". Fed Governor Lisa Cook said last week she was open to the idea that the central bank may need to raise rates to address inflation levels that are "too high".sabcnews+1

Payrolls in Focus

The dollar rose to 158.505 yen in Asian trading Friday after gaining 0.4% on Thursday, putting it on course for a weekly gain of roughly 0.7%. The currency had tumbled earlier in the week after joint Japan-US intervention sent it from near a four-decade high above 163 yen to a 13-week low of 155.20 on Monday.kfgo+1

Against the euro, the greenback edged up to $1.1521.freemalaysiatoday

Attention now turns to Friday's nonfarm payrolls report for July. Economists surveyed by Reuters expect 80,000 jobs were added, following an increase of 57,000 in June, with the unemployment rate holding steady at 4.2%. Francesco Pesole, an FX strategist at ING ↘ 1.35%, said ahead of the release that "tomorrow's payrolls could be pretty big for dollar-yen. If it's a hot print then you would probably start to see a new build up of speculative longs on dollar-yen".sabcnews+2