- Dollar steady, awaits Gulf developments, key economic data
- Lebanon announces partial ceasefire but hostilities persist
- Yen nears 160 per dollar, raises intervention risk, analysts say
TOKYO, June 2 (Reuters) - The U.S. dollar steadied on Tuesday in a wait-and-see approach to Middle East peace talks, with Lebanon announcing a limited ceasefire between the Iran-backed Hezbollah and Israel, although broader geopolitical uncertainties kept traders on edge.
Investors have treated news of any progress toward ending the Iran conflict with caution, given the fragility of a U.S.–Iran ceasefire struck in early April.
The dollar index, which measures the currency against six peers, eased from gains that followed the Lebanon announcement on Monday. While the agreement signalled a degree of de-escalation, it remained limited against the backdrop of a wider regional conflict that has disrupted oil flows through the Strait of Hormuz.
"The situation is likely to remain unstable for the time being, at least until Iran and the U.S. actually strike a deal in their talks," said Kumiko Ishikawa, senior analyst at Sony Financial Group.
"That means markets may stay headline-driven and jittery, but reports of incremental progress alone are unlikely to spread a sense of relief."
The dollar index ticked up to 99.19, the euro edged up to $1.1633 and sterling gained slightly to $1.3457.
The dollar had rallied at the onset of the conflict, which began on February 28, buoyed by safe-haven demand and the U.S. economy's relatively limited exposure to energy-driven inflation. However, it has given back some of those gains due to the uncertainty of the conflict's trajectory.
In Japan, Finance Minister Satsuki Katayama said on Tuesday the authorities stood ready to respond in the currency market as needed and refrained from commenting on recent exchange-rate moves.
The Japanese yen was a tad lower against the dollar at 159.71 per dollar, close to the 160 level widely seen by markets as a trigger for intervention.
"If dollar/yen breaks above 160, the risk of surpassing the April 30 high would increase markedly, raising the likelihood of stronger verbal warnings and a renewed round of rate checks or actual intervention," said Mizuho Securities chief currency strategist Masafumi Yamamoto.
Markets are also waiting for a speech by Bank of Japan Governor Kazuo Ueda on Wednesday for possible signals as to whether the central bank will proceed with a rate increase next week.
On U.S.-Iran ceasefire negotiations, Sony Financial's Ishikawa said that unless sentiment improves, dollar/yen is unlikely to face the sort of dollar-selling pressure that would accompany an unwinding of safe-haven dollar buying.
"On balance, the near-term risk in dollar/yen still appears tilted slightly more toward further dollar strength than dollar weakness," she said.
Later, the U.S. Labor Department will release job openings data ahead of Friday's closely watched monthly employment report, while the euro zone's May consumer price index will also be announced.
Markets are betting the U.S. central bank's next move will be to raise its benchmark interest rate, compared with expectations for a cut before the start of the Iran war, given rising energy prices and the impact they will have on inflation.
Friday's monthly U.S. employment report could help sway the Fed's policy path in the near term. The data is expected to show a gain of 85,000 jobs in May and no change in the current 4.3% unemployment rate, according to a Reuters poll of economists.
The Australian dollar gained just 0.03% to $0.7156 against the U.S. dollar, while New Zealand's kiwi gained a slight 0.02% to $0.593.
In cryptocurrencies, bitcoin fell 0.63% to $70,921.37. Ethereum declined 0.03% to $2,002.13.
Reporting by Satoshi Sugiyama; Editing by Shri Navaratnam and Neil Fullick
Source: Reuters