Dollar steady, yen inches towards 40-year lows
The dollar index was at 100.9, just short of the one-year high it hit last week
The dollar was steady on Monday as the first round of Iran-U.S. talks fuelled investor optimism for a deal, while the yen inched towards 40-year lows, spurring intervention concerns and verbal warnings from Tokyo.
A joint statement from mediating nations Qatar and Pakistan said the U.S. and Iran agreed to a roadmap toward a final deal within 60 days, providing hope for a resolution to a conflict that has weighed on international inflation and rates outlook.
The parties opened a communications line to help ensure safe passage for commercial ships through the contested strait, according to the joint statement.
The dollar index was at 100.9, just short of the one-year high it hit last week. The index is up around 2.7% this year, aided by safe-haven flows and expectations that interest rates will stay higher for longer.
Oil prices dropped nearly 2% after the announcement with Brent crude futures last at $79.09 a barrel.
The physical market remains tight and that should provide some support, but flows in FX and commodities will continue to be heavily influenced by developments in the energy complex, said Chris Weston, head of research at Pepperstone.
Sterling eased 0.22% to $1.3209 as traders assessed the political tumult in Britain, where Prime Minister Keir Starmer was considering his political future after rival Andy Burnham’s decisive parliamentary by-election victory.
OCBC currency strategists do not expect the pound’s initial negative reaction to extend far, and retain a neutral view on the currency.
Current signals suggest Burnham would adhere to the existing fiscal framework, although delivery will matter more than guidance, they said in a note.
The euro last fetched $1.14555, down 0.15% on the day. The risk-sensitive Australian dollar dived 0.17% to $0.7005, while the New Zealand dollar changed hands at $0.57275.
The yen remained in the spotlight, softening to 161.66 per dollar, just short of a two-year low reached last week. A break beyond 161.96 would take the yen to its weakest level since 1986.