FOREX: Dollar eases as US-Iran deal hopes grow, yen firms on intervention speculation

The dollar fell against most major currencies on Wednesday after the U.S. signalled it may be nearing a deal with Iran, while the Japanese yen strengthened sharply to a more than two-month high as markets braced for another intervention.

The yen JPY= was last at 155.00, up nearly 2% to its strongest level since February 24. It had lagged broader dollar weakness earlier in the session before a sudden move higher, triggering speculation of another round of intervention.

Japanese Finance Minister Satsuki Katayama earlier in the week warned against speculative moves in foreign exchange, after a brief jolt higher in the yen sparked speculation Tokyo had again intervened to support the currency.

"As I have said repeatedly, we will take decisive measures against speculative moves, in accordance with the statement signed between Japan and the United States last year," Katayama told reporters after the Asian Development Bank's annual meeting in Uzbekistan.

The Ministry of Finance of Japan could not be reached immediately for comment during a local holiday.

Most other major currencies also extended gains as dollar weakness persisted, after President Donald Trump said he would briefly pause an operation to help escort ships through the Strait of Hormuz, citing progress toward a comprehensive agreement with Iran.

That came shortly after U.S. Secretary of State Marco Rubio said on Tuesday that the United States has achieved its objectives in its military campaign against Iran.

U.S. oil futures fell on Wednesday, with U.S. West Texas Intermediate CLc1 softening to near $100 per barrel.

"The signals sent from the United States appear to offer reassurance that it's not interested in renewing hostilities," said Kyle Rodda, senior analyst at Capital.com.

However, this isn't all good news with oil still trapped and the Strait still closed, he added. "That suggests upward pressure on oil will persist, which could cause a headache for the markets once again down the line."

The euro stood at $1.1740 EUR= and sterling traded at $1.3594 GBP=D3, both up roughly 0.4% so far on the day.

The Australian dollar fetched a four-year high of $0.7250 AUD=D3, and the New Zealand dollar NZD=D3 was up more than 1% at $0.5951, highest in nearly two months.

The dollar index =USD fell nearly 0.3% to 98.026.

The markets are now gearing up for non-farm payrolls release later this week, which will serve as a test whether the economy remains resilient enough to keep the Federal Reserve's monetary policy on hold, or whether a softening labour market could revive the case for interest rate cuts.

-Jiaxing Li/Reuters