NEW YORK: The US dollar was softer against peer currencies for the second straight session on Tuesday, reflecting market positioning ahead of major central bank interest rate decisions this week.
The dollar had reached a 10-month high as the Middle East conflict and rising oil prices prompted investors to seek safety in US assets.
The US Federal Reserve will announce its policy decision on Wednesday, with the European Central Bank, the Bank of England and the Bank of Japan following a day later.
They are all expected to keep rates unchanged although traders will be looking out for commentary about inflation and economic outlook in the wake of the Middle East conflict.
Expectations for Federal Reserve easing have also been scaled back, with markets now assigning about 25 basis points of cuts this year. Traders are pricing in almost two European Central Bank rate hikes in 2026, a sharp shift from the roughly 50 percent chance of a cut seen before the conflict began. The dollar was down 0.11 percent to 0.787 against the Swiss franc , on track for the second straight day of declines.
The dollar index had hit 100.54 on Friday, its highest level since May 2025. It has eased from that peak in the last two sessions, and was last down 0.21 percent to 99.65.
“I think this is mostly market positioning but I am beginning to detect a subtle change in sentiment although we wouldn’t know for sure until we get to the other side of the Federal Reserve meeting,” said Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. “It seems to me that since the (Iran) war began, the dollar was bought on dips and now I think the dollar is being sold on rallies.”
Brent crude futures remained above USD100 a barrel on worries about supply, with the Strait of Hormuz mostly shut. They have risen more than 40 percent since February and were last up 1.94 percent to USD102.15 per barrel.
Iran renewed attacks on the United Arab Emirates on Tuesday, causing oil loading at the port of Fujairah to be at least partly halted after the third attack in four days ignited a fire at the export terminal. Fujairah is located on the Gulf of Oman, just outside the Strait of Hormuz.
The euro was up 0.26 percent against the dollar at USD1.153450 after dropping to as low as USD1.1409 in the prior session, for its lowest level since August 2025.
Australia’s central bank raised rates for a second straight month to a 10-month high, undoing two of the three cuts it made last year and cautioning that risks to inflation have tilted further to the upside. It was the central bank’s most tightly contested vote since it began disclosing tallies last year, with the board split 5-4 in favor of the hike.
The Australian dollar rose 0.41 percent to 0.71005 against the dollar. The yen has veered toward the 2024 forex intervention zone of 161 amid rising oil prices and the Middle East conflict.
Japanese Finance Minister Satsuki Katayama said on Monday and reiterated on Tuesday that the government was prepared to take decisive steps against volatility in foreign exchange and other financial markets.
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