FOREX: Dollar rally pauses on Iran deal hopes; yen edges back from intervention zone

The U.S. dollar hovered below a six-week peak on Thursday after pulling back on rising hopes that Washington is nearing a deal with Tehran to end the war in the Middle East.

U.S. President Donald Trump said negotiations were in the final stages, while also warning of further attacks if Iran does not agree to a deal.

The dollar, a traditional safe haven, fell for the first time in eight sessions against the yen JPY= on Wednesday, and was down slightly at 158.905 yen in early Thursday trading - taking it back from the 160 level that traders and analysts view as a potential trigger for currency intervention by Japanese officials.

The euro EUR= was steady at $1.1626 on Thursday, after dipping to the weakest since April 7 at $1.1583 in the previous session before bouncing back.

The dollar index =USD, which measures the currency against the euro, yen and four other rivals, was flat at 99.128 after touching 99.472 on Wednesday, the strongest level since April 7.

"The 'safe haven' flows reversed because of positive news about the Iran war," Joseph Capurso, head of FX at Commonwealth Bank of Australia, wrote in a client note.

At the same time, "while the U.S. has domestic political incentives to seek peace, we would not be surprised if President Trump chooses military escalation to gain leverage in negotiations," he said.

Australia's dollar AUD= slipped 0.1% to $0.7147 ahead of the release of local employment figures later in the day.

Sterling GBP= was little changed at $1.3430.

Cryptocurrency bitcoin BTC= was flat at around $77,650.

-Kevin Buckland/Reuters