Yen and dollar drift on Iran deal concerns, payroll jitters

The U.S. dollar gained against the Japanese yen on Thursday, driven by safe-haven positioning from investors anticipating news about a potential Iran deal and the upcoming release of the U.S. monthly jobs report on Friday. The dollar has rebounded from recent intervention-driven declines that had pushed it to a 13-week low against the yen after Japanese and U.S. Treasury authorities jointly intervened to support the Japanese currency.

The dollar was last up 0.44% against the yen at 158.45, marking its third consecutive day of gains following a low of 155.20 on Monday, the lowest since early May.

Tensions in the Gulf persisted after Reuters reported a proposed deal between Iran and Oman aimed at ending the U.S.-Iran conflict, which might grant Tehran control over inbound traffic through the Strait of Hormuz. The U.S. has not yet commented on the proposal, and while President Donald Trump has indicated that a deal to reopen the strait was imminent, U.S. officials have consistently maintained that they would not agree to Iranian control of access to the world's most critical trade route for energy supplies.

Brent crude oil prices rose by 3.8% to settle at $82.49 a barrel, although they remain well below the $100-per-barrel level reached in July when attacks resumed following a brief lull. Speculators have accumulated a near-record net dollar long position relative to other major currencies, leaving them vulnerable to a squeeze if there are dollar-negative events, according to Scotiabank's Shaun Osborne.

The upcoming U.S. employment report for July may offer insights into the Federal Reserve's interest rate outlook. The U.S. service sector stayed robust in July, while services-sector employment decelerated. Despite a mixed performance, the U.S. service sector's strength and the Federal Reserve Chairman's commitment to controlling inflation may pave the way for a potential rate hike in September.