Safe-haven demand supports the US dollar at high levels, yen again tests intervention warning level

1. On Thursday, the US Dollar Index edged down by 0.12% to around 99.41 but remained near its two-month high. The latest round of conflict in the Gulf region has dampened market risk appetite, while the USD/JPY exchange rate fluctuated near the critical 160 level, keeping traders highly alert to potential official intervention.2. On Wednesday, Iran launched an attack on Kuwait, damaging Kuwait Airport and injuring dozens. Meanwhile, US forces carried out strikes near the Strait of Hormuz, further complicating the prospects for ending the war through diplomatic means.3. Although Israel and Lebanon have reached a ceasefire agreement, the outlook for a broader peace deal remains unclear. This has kept oil prices elevated and further supported the market's demand for the safe-haven US dollar.4. The euro rose 0.15% against the dollar to $1.1612. Surveys indicate that the market expects the European Central Bank to raise the deposit rate to 2.25% on June 11 to curb inflation.5. Analysts point out that escalating geopolitical tensions are driving up oil prices and global yields, and the dollar's safe-haven status appears to be strengthening again. There is currently no compelling reason to be bearish on the dollar, so a neutral stance is being maintained, with expectations that the dollar will remain firm but trade within a range.6. As for data, a survey showed that last month the US services input price index jumped to its highest level in nearly four years, further reinforcing economists' views that the Federal Reserve will keep interest rates unchanged until next year.7. The USD/JPY stood at 159.87, rebounding from Wednesday's lows. Overnight, the USD/JPY had risen above the 160 level for the first time since April 30, triggering verbal intervention warnings from Japanese officials. The market generally regards 160 as the threshold at which authorities may intervene.8. Bank of Japan Governor Kazuo Ueda has strengthened expectations for a rate hike in June by taking a clearer anti-inflation stance. The inflation risk from the energy shock triggered by the Iran war has created room for more frequent rate hikes.