Dollar Steady, But Sentiment Begins to Change
The US dollar held steady on Friday (June 12th), but remained on track for its second weekly decline in three weeks. Pressure arose as markets grew optimistic that an interim US-Iran deal could be signed in the coming days and reopen the Strait of Hormuz.
The Bloomberg Dollar Spot Index was flat after rising 0.2% earlier in the session. Most G-10 currencies weakened against the dollar, with the Swedish krona the only gainer. Meanwhile, the 10-year US Treasury yield rose 2 basis points to 4.48%, providing some support for the dollar.
Market sentiment improved after a senior Trump administration official said the chances of a deal being signed soon were in the 80%–85% range, although some Iranian hardliners still had the potential to hinder the process. If a deal is reached and Hormuz reopens, pressure on energy prices could ease and demand for the dollar as a safe haven asset would also decrease.
Data-wise, US consumer sentiment rose in early June for the first time in four months, helped by lower gasoline prices. However, the market continues to monitor inflation expectations and the Fed's policy direction, especially as energy prices remain sensitive to developments in the Middle East.
In the main FX market, USD/JPY rose 0.18% to 160.21, again approaching the sensitive area for Japanese intervention. CFTC data showed leveraged funds increased their bearish positions against the yen to the highest level since 2017, while bullish positions against the dollar rose to US$27.8 billion, the highest in more than a year.
EUR/USD edged down 0.1% to 1.1569, after paring earlier losses. The euro remains influenced by ECB signals, with official Joachim Nagel stating that the central bank is ready to raise interest rates again next month if the impact of the Middle East war worsens inflation. For now, the dollar's direction will depend on confirmation of the US-Iran deal, oil prices, Fed expectations, and the risk of intervention in the yen. (arl)*
Source: Newsmaker.id
