Yen touches 160, dollar slips from two-month high amid Iran talks

By Hannah Lang

NEW YORK, June 4 (Reuters) - The dollar slipped from a two-month high on Thursday as optimism rose about a ceasefire in Lebanon, while markets were alert to possible intervention as the Japanese yen touched the key 160 level.

Lebanese President Joseph Aoun said on Thursday the ceasefire with Israel would come into force within 24 hours of all concerned parties approving it. However, pro-Iran Lebanese group Hezbollah rejected the ceasefire plan agreed in U.S.-mediated talks and Israel kept up strikes in southern Lebanon. 

Iran has said a ceasefire in Lebanon is a key step in advancing broader peace talks. 

The euro rose 0.15% to $1.1616. A Reuters poll forecast that the European Central Bank will raise its deposit rate to 2.25% on June 11 to curb inflation. The British pound also climbed, by 0.05% to $1.345. 

The dollar index, which measures the greenback against major peers, fell 0.044% to 99.405, down from a two-month high of 99.56 reached in the previous session.

Iranian attacks on Kuwait damaged its airport and injured dozens on Wednesday, while the U.S. military carried out strikes near the Strait of Hormuz, complicating prospects for a diplomatic end to the Iran war and lifting the safe-haven dollar.

"It's hard to argue against dollar strength at this juncture," said Francesco Pesole, currency strategist at ING.

"Data continues to paint a picture of resilience for the U.S. economy," he said, adding that doubts about the peace talks have boosted the dollar.

The risk-sensitive Australian dollar fell 0.13% to $0.714.

On the data front, a survey on Wednesday showed a measure of prices paid by U.S. services businesses jumped to the highest level in nearly four years last month, cementing economists' views that the Federal Reserve would hold interest rates unchanged well into next year. 

The Japanese yen fetched 160.015 per dollar, after hitting the critical 160-per-dollar mark on Wednesday for the first time since April 30, triggering verbal warnings from authorities.

The 160 level is widely seen in markets as a line in the ‌sand ⁠for potential official intervention.

Bank of Japan Governor Kazuo Ueda cemented a June rate hike in a narrative pivot toward inflation-fighting, as the Iran war-driven energy shock sharpens price risks and opens the door to more frequent increases in borrowing costs. 

"The hawkish tone has strengthened further, including a clear expression of concern about behind-the-curve risk," wrote Naohiko Baba, head of Japan research and chief Japan economist at Barclays. "We stick to our June rate hike call."

Bitcoin hit a four-month trough of $61,344 and was last 1.84% lower at $63,713.

(Reporting by Hannah Lang; additional reporting by Jiaxing Li and Harry Robertson; Editing by Joyjeet Das, Shailesh Kuber, Susan Fenton, Rod Nickel)