The dollar traded in a narrow range on Tuesday as investors closely monitored ongoing negotiations between the U.S. and Iran to potentially reopen the Strait of Hormuz. A successful agreement could alleviate pressure on currencies of oil-importing nations and reduce the dollar's safe-haven appeal.
The dollar index, which measures the currency against six peers, was up 0.046% at 99.216. It has remained within a tight range of 98.9 to 99.5 since May 15. Despite rising energy prices, the U.S. economy has shown stability, though growth has slowed and job openings have increased. Euro zone inflation data has reinforced expectations for a European Central Bank rate hike, with traders anticipating two hikes by December. The euro fell 0.03% to $1.1629.
Japan's Finance Minister Satsuki Katayama indicated readiness to intervene in currency markets if necessary, as the yen weakened to 159.920 per dollar, nearing the 160 mark seen as a potential trigger for action. Meanwhile, U.S. job openings rose to 7.618 million in April, ahead of Friday's employment report, with markets expecting a Federal Reserve rate increase.
“The dollar could gain momentum through the week if US-Iran negotiations remain inconclusive and Friday's non-farm payrolls report confirms continued resilience in the world's largest economy.”
Karl Schamotta, chief market strategist at Corpay
Bitcoin saw a decline, dropping 5.8% to $67,213.42, its lowest since April. Investors remain cautious about the U.S.-Iran talks, given the fragile ceasefire and frequent assertions by President Trump that an agreement is near.
"The dollar could gain momentum through the week if US-Iran negotiations remain inconclusive and Friday's non-farm payrolls report confirms continued resilience in the world's largest economy," said Karl Schamotta, chief market strategist at Corpay.
Background
The ongoing negotiations between the U.S. and Iran are crucial as they could significantly impact global oil supply routes and currency markets. The Strait of Hormuz is a vital passage for oil transportation, and its reopening could stabilize energy prices and influence currency valuations.
Investors will be closely watching the outcome of the U.S.-Iran talks and upcoming economic data, including the non-farm payrolls report, which could provide further direction for the dollar and global markets.
