The U.S. dollar traded in a tight range Tuesday as investors monitored developments in ongoing U.S.-Iran negotiations and the potential reopening of the Strait of Hormuz, a key global oil shipping route. Market participants remained cautious amid uncertainty surrounding the conflict and the durability of a ceasefire reached earlier this year between Washington and Tehran.
According to a Reuters report by Hannah Lang and Stefano Rebaudo, with additional reporting by Satoshi Sugiyama, the dollar index, which measures the greenback against a basket of six major currencies, edged higher to 99.216 and has largely remained between 98.9 and 99.5 since May 15. Analysts cited in the report noted that the dollar could strengthen if negotiations fail to advance and upcoming U.S. economic data, including Friday’s non-farm payrolls report, continues to point to resilience in the U.S. economy.
The Reuters report also noted that euro zone inflation data reinforced expectations for additional European Central Bank rate hikes, while the Japanese yen weakened to near 160 per dollar, increasing speculation that Japanese authorities could intervene in currency markets. Investors are also awaiting comments from Bank of Japan Governor Kazuo Ueda for further guidance on potential policy tightening.
The narrow trading range for the dollar reflects a market in wait-and-see mode, with the outcome of U.S.-Iran talks potentially having significant implications for global oil supply and geopolitical risk. A successful reopening of the Strait of Hormuz could ease oil prices and reduce safe-haven demand for the dollar, while a breakdown could lead to heightened volatility and dollar strength. Meanwhile, the yen's approach to the 160-per-dollar level, a threshold that previously prompted intervention by Japanese authorities in 2022, keeps currency markets on edge. Any intervention would likely boost the yen temporarily but may not reverse its broader weakening trend without fundamental changes in monetary policy.
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