US-Iran Negotiations Pressure Dollar
The US dollar weakened and hit a one-week low in the latest trading on Friday (July 10). This weakening occurred as the market monitored the continuation of talks between the United States and Iran regarding a permanent peace agreement.
The Bloomberg Dollar Spot Index briefly fell as much as 0.3% to its lowest level in a week before paring some of its losses. Pressure on the dollar was also in line with the decline in the yield on the 10-year US Treasury bond by two basis points to 4.53%.
The Japanese yen was one of the currencies that strengthened against the US dollar. USD/JPY briefly fell as much as 0.7% to 161.29, its lowest since July 6, after Japanese Finance Minister Satsuki Katayama asked national pension funds, including the GPIF, to increase investment in domestic financial assets.
The market interpreted this statement as a signal that the Japanese government wanted to encourage more household and institutional funds to flow into domestic assets. This condition has the potential to support the yen, although USD/JPY subsequently stabilized above 161.60 and is still up around 0.2% throughout the week.
Market Impact:
For the US dollar, this weakening indicates pressure is starting to emerge after Treasury yields fell and the market perceives geopolitical risks as easing somewhat. If US-Iran negotiations continue positively, demand for the dollar as a safe haven could diminish.
For the Japanese yen, sentiment from the Japanese government is a positive catalyst. If pension funds actually increase their exposure to domestic assets, the inflow of funds could support the yen's strength in the short term.
For gold, the weakening dollar and falling US yields should be supportive sentiment. However, the room for gold's strength remains dependent on expectations for the Fed's interest rate and developments in oil prices.
For the rupiah and Asian assets, a weakening dollar could be positive news. Pressure on emerging market currencies has the potential to ease, although investors will still be closely monitoring the direction of US yields, the Middle East conflict, and global sentiment toward risky assets.
Source: Newsmaker.id
