Dollar remains stable following hawkish Fed minutes; Australian dollar falls due to weak employment data.

The dollar stabilized in Asian trading on Thursday following recent comments from the Federal Reserve indicating that more policymakers are receptive to interest rate increases.

This hawkish stance, combined with ongoing uncertainty regarding the war in Iran, contributed to declines in Asian currencies. The Australian dollar notably underperformed, largely due to disappointing employment figures from the country.

The Japanese yen remained stable after positive trade and purchasing managers index data, while the Indian rupee reached new record lows.

The dollar index and its futures saw an increase of approximately 0.1% on Thursday, maintaining proximity to six-week highs achieved earlier this week.

Minutes from the Fed's late-April meeting revealed a growing number of officials contemplating interest rate hikes in response to rising inflation.

Inflation surged over the past two months, primarily due to increased energy costs stemming from supply disruptions linked to the U.S.-Israel war on Iran.

A majority of Fed officials expressed willingness to consider “some policy firming” if inflation continued to exceed the central bank's 2% target, as indicated in the minutes. This suggests a more hawkish posture for the central bank ahead of Kevin Warsh's ascension to chair.

Conflicting signals regarding the Iran war also supported the dollar, with concerns that a prolonged conflict could sustain high oil prices in the long run.

U.S. President Donald Trump had mentioned progress in peace negotiations earlier this week. However, on Wednesday, he warned of renewed military action against Iran if a peace deal wasn't accepted soon.

The Australian dollar's AUD/USD pair fell by 0.5% on Thursday, mainly due to weaker-than-expected employment figures for April.

Unemployment climbed unexpectedly to a 4.5-year high, with a decline in the total number of employed individuals.

This data indicated a slowdown in Australia's otherwise robust labor market and reinforced expectations that the Reserve Bank of Australia will maintain interest rates in June.

The central bank had indicated this during its last meeting, noting it would observe the impacts of previous rate hikes and the Iran conflict after raising rates by 75 basis points.

The Japanese yen’s USD/JPY pair held steady following a better-than-expected trade balance in April, primarily driven by strong exports to the U.S. and China. However, imports also surged, influenced by demand for semiconductors and electronics as Japanese firms expanded their artificial intelligence capabilities.

Data on purchasing managers in Japan indicated growth in both manufacturing and services in early May.

The Chinese yuan’s USD/CNY pair remained unchanged, while the Taiwan dollar’s USD/TWD and the South Korean won’s USD/KRW experienced slight increases. The Singapore dollar’s USD/SGD gained 0.1%.

The Indian rupee’s USD/INR pair showed little movement after reaching a series of record highs this week, coming close to crossing 97 to the dollar for the first time.