Dollar Weakens, US-Iran Deal Cuts Safe Haven
The US dollar weakened against G-10 currencies after the United States and Iran reached a tentative agreement to reopen the Strait of Hormuz. The Bloomberg Dollar Spot Index fell 0.3%, extending last week's 0.4% decline, as investors began to shed demand for the dollar as a safe haven.
The dollar's decline also coincided with falling US Treasury yields and oil prices. The 2-year Treasury yield fell 5 basis points to 4.03%, while Brent plunged nearly 5% to around US$83/barrel. This combination suggests the market is beginning to assess the risks of energy inflation and geopolitical escalation that could ease if Hormuz is indeed reopened.
The US-Iran deal is said to pave the way for 60 days of negotiations on Iran's nuclear program. Officials from both countries are scheduled to meet in Switzerland on June 19 to sign the agreement. However, no official text has been released, leaving several key details unclear.
Therefore, the market remains cautious. This agreement is indeed constructive, but remains clouded by skepticism due to its perceived shaky foundation. Many technical details have yet to be signed, including the mechanism for opening Hormuz, the status of the blockade, and the stages of nuclear negotiations.
From a foreign exchange market perspective, the dollar's weakening primarily reflects a decline in geopolitical risk premiums. If the agreement goes through and energy flows return to normal, the dollar could lose some of its safe-haven support. However, if the details of the agreement... (asd)
Source: Newsmaker.id
