Dollar Weakens from Two-Month High Ahead of US Inflation Data
The US dollar weakened slightly on Tuesday (June 9), retreating from a two-month high, as risk sentiment improved after Israel and Iran halted their attacks following diplomatic efforts led by US President Donald Trump.
The US Dollar Index (DXY) fell 0.1% to 99.93, slightly below the peak of 100.21 touched the previous day.
Trump said the US was "close to achieving total victory" in the conflict with Iran and oil prices are likely to fall sharply. However, investors remain cautious about the sustainability of the ceasefire and uncertainty in the Strait of Hormuz, a vital route for global energy shipments.
Treasury yields remained high after a strong US jobs report, supporting expectations that the Federal Reserve could maintain tight monetary policy for longer. Currently, the market is projecting a roughly 70% chance of a Fed rate hike in December.
Investors are now focused on US inflation data, with the Consumer Price Index (CPI) scheduled for release on Wednesday and the Producer Price Index (PPI) on Thursday. A higher-than-expected rise in inflation could strengthen the case for tighter monetary policy and support the dollar.
In Europe, the euro (EUR/USD) strengthened for the second consecutive session ahead of Thursday's European Central Bank (ECB) meeting, where markets are expecting a 25 basis point interest rate hike due to inflationary pressures stemming from the Middle East conflict. Although the interest rate decision is already in the books, the ECB's guidance will be the focus for investors as they understand the implications of energy costs on inflation.
In Asia, Bank Indonesia surprised markets by raising its benchmark interest rate by 25 basis points to 5.50% to support the rupiah amid dwindling foreign exchange reserves. The rupiah (IDR/USD) surged nearly 1%, its biggest daily gain in more than a year.
Meanwhile, the Japanese yen (USD/JPY) remained above the 160 level, the point at which markets typically await possible intervention from Tokyo.
Source: Newsmaker.id
