Dollar Holds Near Multi-Week Range as Markets Monitor U.S.-Iran Negotiations
The dollar index remained near 99.2 within a narrow range since mid-May, as investors watched U.S.-Iran negotiations and the potential reopening of the Strait of Hormuz, with the yen near 160 per dollar raising intervention speculation.
The U.S. dollar traded in a tight range Tuesday as investors monitored developments in ongoing U.S.-Iran negotiations and the potential reopening of the Strait of Hormuz, a key global oil shipping route. Market participants remained cautious amid uncertainty surrounding the conflict and the durability of a ceasefire reached earlier this year between Washington and Tehran, according to a Reuters report by Hannah Lang and Stefano Rebaudo.
The dollar index, which measures the greenback against a basket of six major currencies, edged higher to 99.216 and has largely remained between 98.9 and 99.5 since May 15. Analysts cited in the report noted that the dollar could strengthen if negotiations fail to advance and upcoming U.S. economic data, including Friday’s non-farm payrolls report, continues to point to resilience in the U.S. economy.
The Reuters report also noted that euro zone inflation data reinforced expectations for additional European Central Bank rate hikes, while the Japanese yen weakened to near 160 per dollar, increasing speculation that Japanese authorities could intervene in currency markets. Investors are also awaiting comments from Bank of Japan Governor Kazuo Ueda for further guidance on potential policy tightening.
The narrow trading range for the dollar reflects a market in wait-and-see mode, with multiple crosscurrents at play. On one hand, progress in U.S.-Iran talks could ease geopolitical tensions and reduce oil price risks, potentially weighing on the dollar. On the other hand, a breakdown in negotiations could boost safe-haven demand for the greenback. The outcome of Friday’s payrolls report will also be critical, as a strong reading could reinforce the Federal Reserve's hawkish stance and support the dollar.
Meanwhile, the yen's slide to 160 per dollar has put traders on alert for possible intervention by Japanese authorities. The Bank of Japan’s policy meeting later this month will be closely watched for any signals of a shift away from ultra-loose monetary policy. The euro, supported by sticky inflation, may continue to strengthen against the dollar if the ECB maintains its tightening path.
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