Dollar Weakens, Markets Await Finalization of US-Iran Deal
The US dollar weakened against major currencies on Monday (June 15th) as market participants reduced safe-haven positions after risk sentiment improved. The main catalyst came from the peace framework agreement between the United States and Iran, which opens the door to the reopening of the Strait of Hormuz.
The US Dollar Index (DXY) traded around 99.57 after dropping to a one-week low near 99.38. This weakening indicates that demand for the dollar as a safe-haven asset is starting to wane as markets assess geopolitical risks and energy pressures are easing.
However, pressure on the dollar remains limited. Traders are hesitant to build aggressive bearish positions before the final US-Iran deal is officially signed on Friday. As long as the details of the Hormuz agreement's implementation remain unclear, the market still has room for volatility in the dollar, oil, and risk assets.
Fundamentally, the main transmission for the dollar comes from oil and inflation. If Hormuz reopens and energy prices remain low, inflation risks could subside and expectations for a Fed rate hike could weaken. This condition typically reduces the dollar's appeal, especially when yields also move lower.
The market's next focus will be on the Federal Reserve's policy decision on Wednesday. The Fed is widely expected to keep interest rates unchanged, but investors will scrutinize the statement's language and policy projections to assess whether inflationary pressures remain strong enough to open the door to further rate hikes.
Source: Newsmaker.id
