NEW YORK: The dollar fell against major peers on Tuesday as a fragile ceasefire between Israel and Iran held and investors looked ahead to key US data later in the week.
The greenback tends to weaken against the euro and yen when tensions in the Middle East ease, as prospects for a peace deal can dampen oil prices. Israel and Iran halted direct attacks on each other on Monday following an appeal by US President Donald Trump.
However, Israel struck the historic port city of Tyre in southern Lebanon on Tuesday, killing at least eight people, in an escalation that complicates efforts to broker a broader peace deal.
The US economy is seen as relatively insulated from energy shocks compared with its peers, a factor that has supported safe-haven demand for the dollar during the Iran conflict, while weighing on the euro and Japanese yen.
The dollar weakened 0.04 percent to 0.797 against the Swiss franc . US Treasury yields jumped on Friday after data showed employers added far more jobs than expected in May, strengthening expectations that the Federal Reserve could raise interest rates later this year.
Investors are now focused on US inflation data due on Wednesday for further signals on the Fed’s policy path. Fed funds futures indicate a roughly 70 percent chance of a rate hike by December, according to CME FedWatch.
“The market had to digest last week’s rather strong non-farm payrolls report, which is a lot stronger than expected,” said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey.
“Certainly, there are geopolitical tensions that have been the case for months now and we’re in the same push-pull situation that we’ve been hearing over and over again. But the market is focused on the resilience of the US economy.”
The US dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was down 0.22 percent at 99.82, after reaching 100.21 on Monday, its highest level since April 6.
Solid growth and persistent inflation are likely to keep expectations tilted toward further US rate hikes, even as any potential US-Iran deal could offer some relief.
Attention is also turning to the European Central Bank’s upcoming policy meeting, where a 25-basis-point rate hike is widely expected. Markets will watch Thursday’s announcement for signals on the policy outlook.
The single currency was 0.26 percent stronger at USD1.156275 after hitting a two-month low in the previous session.
Meanwhile, a Bank of Japan rate hike at the June 16 policy meeting is now almost fully priced in, meaning it is unlikely on its own to trigger a significant reversal in yen weakness if delivered. The Japanese yen weakened to as low as 160.21, continuing to hover around the 160 level widely seen as a line in the sand for potential official intervention.
The risk-sensitive Australian dollar weakened 0.18 percent versus the greenback to USD0.7031. The kiwi strengthened 0.31 percent versus the greenback to USD0.5824.
Comments