Dollar edges lower ahead of Middle East talks

The dollar dropped 1.5% in the previous week as the U.S. central bank held interest rates steady

The U.S. dollar edged lower Monday as investors awaited a new round of Iran-U.S. negotiations later in the day, while the yen extended gains on expectations that Tokyo could intervene again to support the currency after last week’s coordinated action.

The U.S. Dollar Index edged 0.1% lower to 99.80 in Asian trade by 07:01 GMT.

The dollar dropped 1.5% in the previous week as the U.S. central bank held interest rates steady and provided little clue on its next move.

Investor focus was on the latest round of Iran-U.S. talks after the U.S. president said negotiations would resume on Monday but declined to set a deadline for reaching a deal.

The talks are expected to focus on measures to ensure safe navigation through the Strait of Hormuz after weeks of war disrupted oil shipments.

Lower oil prices should also be weighing on the dollar on reports from US President Donald Trump that negotiation, rather than military firepower, is Washington’s preferred method of engaging with Iran, ING analysts said in a note.

Despite a lot of dollars having been supplied to the market over the last three days – perhaps $70-80bn – the broader dollar is holding up quite well. Whether that continues to be the case will be a function of this week’s US jobs data, ING analysts added.

Investors looked ahead to a busy week of economic data that could provide new clues on the central bank’s interest rate path, with Tuesday’s JOLTS job openings report, Wednesday’s ADP private payrolls and ISM services survey, Thursday’s weekly jobless claims and Friday’s closely watched nonfarm payrolls report all in focus.

For the day, the focus remains on July ISM manufacturing data.