Dollar slips on US-Iran peace hopes as stocks steady on jobs data

The US dollar fell on Friday, heading for its second straight weekly decline, as investors bet Washington and Tehran would reach a diplomatic end to the conflict that has choked oil flows through the Strait of Hormuz. US stocks were mixed but held near record levels after stronger than expected jobs data offset the drag from higher crude prices.

The moves followed a week of wild swings. On Tuesday, a report that the two sides were close to a peace memorandum set off a sharp rally in equities and knocked the dollar lower against its major peers. The S&P 500 and the Nasdaq 100 both hit record closes on Wednesday. WTI crude slumped toward $90.50 a barrel. By Friday, renewed clashes between US and Iranian forces in the Gulf had pushed oil back up and checked the rally.

The dollar index, which measures the greenback against a basket of six currencies, slipped 0.3 per cent to trade near a three-week low. Sterling added 0.28 per cent to trade above $1.34, its strongest since early April. The Australian dollar hit $0.7238, near a four-year high. The euro gained 0.6 per cent to a two-week high against the dollar.

The yen firmed to about 155 per dollar. Traders pointed to suspected intervention by Japanese authorities and the broader sell-off in the greenback. In Tokyo, the Nikkei 225 surged 5.4 per cent on Thursday to a record close of 62,720, driven by a weaker yen and the global semiconductor rally.

In New York, the S&P 500 slipped 0.3 per cent from Wednesday’s record close of 7,365. The Dow Jones Industrial Average fell 0.4 per cent. The Nasdaq 100 added 0.5 per cent, adding to gains after a run of strong chipmaker earnings. Qualcomm rose 8 per cent on results that beat estimates and a new AI chip partnership. Advanced Micro Devices jumped 16.5 per cent after hours, raising its revenue forecast on what it called an unprecedented wave of AI infrastructure spending. Intel climbed 13 per cent after reports it was in early talks to make chips for Apple.

European stocks also rose. Germany’s DAX gained 2.1 per cent to close at a record 24,918. The Stoxx 600 added 1.2 per cent.

Jobs data points to resilient labour market

US initial jobless claims for the week ending 2 May came in at 200,000, below the 205,000 forecast and only slightly above the prior week’s 189,000. The number reinforced the view that the labour market is tight enough to keep the Federal Reserve from cutting rates soon.

Cleveland Fed President Beth Hammack said rates would stay on hold “for quite some time,” pointing to significant uncertainty in the outlook. She said the Fed’s policy statement should not signal whether the next move is a cut or a hike. Most officials have called the labour market stable, though not yet at full employment.

The Challenger report showed announced layoffs rose to 83,687 in April from 60,620 in March. Economists said the series is volatile and does not always match the government payroll data. The April jobs report is due Friday, with economists forecasting 62,000 new jobs.

Oil whipsaws on Gulf headlines

No major asset moved more violently than crude this week. WTI slumped nearly 10 per cent from its weekly peak on Wednesday, touching $90.50 a barrel, the lowest since the conflict began. Markets priced in a quick end to the US-Iran standoff. By Friday, crude was back above $100 after the US disabled two Iranian vessels and Iran seized a commercial tanker in the Gulf of Oman. The ceasefire in the Strait of Hormuz is fraying.

Brent crude, the global benchmark, traded at $100.80 a barrel on Friday afternoon in London, up $2.40 on the day. The swing kept energy stocks and inflation-linked assets under pressure.

Gold rallies on dollar weakness

Gold jumped 3.2 per cent on Wednesday to $4,703 per troy ounce, the highest since late April. The weaker dollar sent money into the metal. Spot gold held near $4,680 on Friday. Investors also bought gold as a haven. The talks between Washington and Tehran remained unresolved.

The 30-year Treasury yield fell below 5 per cent, settling at 4.98 per cent. The 10-year note held at 4.4 per cent. Bond traders bet that cheaper oil would follow any deal, easing price pressures and clearing a path for the Fed to cut rates later.

What happens next

Friday’s jobs report and a round of Fed speeches could shift the rate outlook. But the dollar, stocks, and oil are all trading on one question: whether the US and Iran sign a deal.

Pakistani officials brokering the talks said ending the war was the first goal. Nuclear issues would wait. A signed memorandum would probably knock the dollar further and lift equities. No deal, and oil could break past $110, undoing the week’s rally.