NEW YORK: The US dollar dipped after reaching its highest level in about a week on Wednesday after US President Donald Trump said an interim memorandum of understanding signed with Iran to end their conflict was “over”, while investors digested the minutes from the Federal Reserve’s recent meeting.
Trump said an interim agreement to end the war with Iran was “over” and that the United States was likely to launch new strikes on Wednesday night following Iranian attacks on US bases in the Gulf.
However, Trump also said he did not expect a return to full-fledged war, and it was not clear whether the negotiations on reaching a permanent deal would carry on. Oil prices jumped, with US crude up 4.36% to US$73.51 a barrel and Brent climbing to US$78 per barrel, up 5.23% on the day. US Treasury yields also climbed.
The dollar index, which measures the greenback against a basket of currencies, fell 0.2% to 100.98 after earlier climbing to 101.27, with the euro up 0.12% at US$1.1425.
“The positioning is a little crowded on the long side, what that tells me is dollar strength is fully pricing in this idea that the Federal Reserve (Fed) is going to get in here and raise rates and support rate differentials for the United States.
“It’s also largely priced in geopolitical risk,” said Thomas Urano, co-chief investment officer at Sage Advisory in Austin, Texas, who noted the dollar has seen strong gains from its late January low this year. “It just leaves the dollar in a spot where it could be susceptible for corrections.”
Expectations for a rate hike of at least 25 basis points from the Fed at its July meeting inched up to 30.5% from 26.7% in the prior session, while odds for the September meeting rose to 65.7% from 61.9%, according to CME FedWatch. — Reuters
