The dollar index steadied around 101.39 points on Thursday, remaining close to its strongest levels since May 2025

The dollar hovered close to recent 13-month highs as markets awaited key U.S. labour data for more cues on interest rates, while the yen wallowed near 40-year lows with focus remaining on government intervention.

Hawkish comments from U.S. central bank Chair Kevin Warsh on Wednesday underpinned the dollar, amid growing conviction that the bank will raise interest rates this year.

The yen was pinned at 40-year lows even as persistent weakness in the currency kept traders wary of government intervention in currency markets. USD/JPY steadied at 162.53 yen.

The dollar index steadied around 101.39 points on Thursday, remaining close to its strongest levels since May 2025.

The U.S. currency firmed in overnight trade after Warsh said at a European Central Bank forum that he will stick closely to the central bank’s 2% annual inflation target, and will “disappoint” anyone who expects loose monetary policy.

His comments came amid growing conviction that the bank will raise interest rates at least once this year, with several policymakers having indicated as much during the bank’s June meeting.

The newly appointed central bank chair said the bank will decide whether to raise rates in its July meeting.

Bets on a hawkish central bank come chiefly from increasingly sticky U.S. inflation in recent months, with high energy prices and rising chip costs contributing to overall price pressures.

Yen weak with intervention in focus; Aussie flat after surprise trade deficit

The yen was among the worst-hit currencies by recent speculation over U.S. rate hikes, keeping markets on guard over any more currency market intervention by Tokyo.

Tokyo had spent tens of billions of dollars to support the yen through late-April and early-May, although the measures yielded fleeting strength in the beleaguered currency. A recent interest rate hike by the Bank of Japan also did little to boost the yen.

The Australian dollar’s AUD/USD pair hovered near three-month lows after the country unexpectedly logged its biggest trade deficit in 11 years in May.