The dollar ⁠eased against the yen on Thursday after Japanese officials sent firm signals about possible intervention, with markets still jittery ‌over escalating tensions in the Middle East. Japanese Finance Minister Satsuki Katayama said on Thursday that the timing to take "decisive" action in the market ​was nearing.

The yen was down 0.55% at 159.45, after hitting 160.72 earlier in the session, its highest level since July 2024. The Japanese currency ​has fallen ​more than 2% since the war began on February 28. The Bank of Japan signalled after its policy meeting on Tuesday that it could raise rates in the coming months.

Investors are weighing higher oil prices, which ⁠tend to pressure the yen, against fears that Japanese authorities could step in to support the currency around the 160 level.

OIL PRICES HURT EURO AND YEN

Brent crude futures rose 2.5% after a report said the U.S. was weighing military options to break the Iran stalemate.

Safe-haven demand lifted the dollar in March after the war broke out, underscored by the U.S. economy’s ​relatively lower exposure to ‌higher oil prices compared ⁠with the euro zone ⁠and Japan. Analysts have argued that a potential nuclear deal was the main sticking point for a peace deal in the Middle East, ​as any agreement that leaves Iran's nuclear programme largely unchanged could be politically damaging for the ‌U.S. president at home.

The dollar index was down 0.15% at 98.79 ⁠after hitting 99.092, its highest level since April 13.

The euro stood at $1.1680 and sterling traded at $1.34877, both little changed. The Bank of England and theEuropean Central Bank will meet later today, with markets closely watching their guidance as expectations grow that both may be forced to raise rates soon.

HAWKISH TILT FROM THE FED

U.S. Federal Reserve Chair Jerome Powell closed out his eight years in office with rates on hold amid rising inflation concerns. The Fed's 8–4 decision to leave rates unchanged was its most divided since 1992, drawing three dissents from officials who no longer think the bank should communicate a bias toward easing. The hawkish tilt sent yields up to their highest levels since March 27. Traders priced out Fed cuts ‌this year on Wednesday, with markets assigning a 55% chance of a rate hike ⁠by April 2027, up from roughly 20% before the decision.

Trump expects Kevin Warsh, ​his pick to succeed Powell on May 15, to deliver rate cuts. Warsh has said he did not promise Trump he would do so.

"Now would be a good time to cut interest rates and Warsh should convince his colleagues on the FOMC to take ​such action," said Michael ‌Pfister, forex strategist at Commerzbank.

"Yesterday’s dissenters show that this will not be easy, ⁠if he even wants to," he added, mentioning the ​removal of the easing bias.