Hopes for Peace with Iran Weigh on the Dollar
The US Dollar Index (DXY) traded near six-week lows on Wednesday (Aug 5). The DXY fell approximately 0.1% to 99.78, pressured by growing hopes for an interim US-Iran deal to reopen the Strait of Hormuz.
Oil prices continued to decline for a third day after Qatar announced that a draft proposal had been prepared. Brent crude fell toward US$79 per barrel, while WTI hovered around US$75. Lower oil prices eased inflation risks and dampened expectations for Federal Reserve interest rate hikes, thereby limiting the dollar's appeal.
However, the dollar did not weaken further, as the US economy remains relatively resilient and the possibility of Fed tightening has not been entirely ruled out. Markets also remain cautious, as the Hormuz deal has not yet been officially announced and previous negotiations failed to yield a resolution.
In Japan, the USD/JPY pair held steady around 157.70 following a sharp yen rally driven by joint intervention from Tokyo and Washington. US Treasury Secretary Scott Bessent affirmed Washington's readiness to assist Japan in maintaining yen stability, although long-term appreciation depends on Bank of Japan policy and the interest rate differential between the two nations.
The Reserve Bank of India also maintained its benchmark interest rate at 5.25% with a neutral policy stance. The rupee strengthened as the drop in oil prices alleviated concerns regarding energy import costs and inflationary pressure in India.
Newsmaker Analysis: As long as the DXY remains below the 100.00–100.20 range, downward pressure on the dollar persists, with targets set at 99.50 and 99.20. A Hormuz deal could extend the dollar's weakness and support gold prices. Conversely, a diplomatic failure or strong US labor market data could push the DXY back above 100 and put pressure on gold.
Source: Newsmaker.id
