Dollar Weakens, Oil Slides as US-Iran Peace Framework Spurs Risk Appetite
Forecast Trend Report by Period
The dollar weakened and appetite for risk assets improved after news that the US and Iran had agreed on peace negotiations.
Reuters reported on June 14 that the dollar index fell as low as 99.49 during trading, the weakest level since June 5. The index measures the US currency against six major peers.
The euro rose 0.35% against the dollar to $1.1607, while the British pound traded 0.3% higher at $1.3448. The Australian and New Zealand dollars also gained 0.5% and 0.4%, respectively, as risk sentiment strengthened.
The market move followed progress in peace talks between Washington and Tehran. Officials from both countries said the previous day that they had reached a framework centered on ending the war, reopening the Strait of Hormuz and lifting the US blockade on Iran.
Oil prices also fell sharply. Brent crude dropped more than 4% to $83.82 a barrel, surrendering much of the Middle East supply premium.
Still, caution lingered in the market. President Donald Trump told The New York Times that military action could resume if Iran fails to reach a final nuclear agreement.
Nick Twidale, ATFX's global chief market strategist, said dollar weakness and gains in risk-sensitive currencies could continue in the coming days. It remains unclear, however, how quickly the Strait of Hormuz will return to normal and how fast oil supply will recover, he added. Normalizing crude shipments will probably take months rather than weeks.
Meanwhile, the Bank of Japan is expected to raise interest rates at its June 16 monetary policy meeting to the highest level in 31 years. The move would reflect a broader tightening trend among major central banks, alongside the European Central Bank's recent rate increase.
