The U.S. dollar weakened against major currencies at the start of Asian trading on Monday after the United States temporarily paused its bombing campaign in Iran over the weekend. The move pushed oil prices lower and improved global risk sentiment.

Dollar Falls Against Major Currencies

Against the Japanese yen, the U.S. dollar declined 0.2% to 163.585 yen, marking its largest drop since July 10.

The euro rose 0.2% to $1.1397, while the British pound gained by a similar margin to $1.3353.

The U.S. Dollar Index fell 0.25% to 101.23 as markets entered a week filled with major central bank meetings, including the Federal Reserve’s policy decision.

Oil Prices Drop as Tensions Ease

Brent crude fell 4.7% to $92.19 per barrel after the U.S. military temporarily halted its two-week bombing campaign.

A senior Iranian official said Iran would also suspend its attacks as long as the United States did the same. Reports of renewed diplomatic efforts and continued oil exports from the Middle East helped improve market confidence.

Markets Remain Focused on the Fed

Fed funds futures are pricing in a 36.3% probability that the Federal Reserve will raise interest rates by 25 basis points at its two-day meeting ending on Wednesday.

Although expectations for a rate hike have increased, the overall probability remains little changed from Friday.

Risk-Sensitive Assets Recover

The New Zealand dollar rose 0.3% to $0.5802, while the Australian dollar gained 0.2% to $0.6997.

In the cryptocurrency market, Bitcoin advanced 0.9% to $65,193.62, while Ether climbed 1.9% to $1,948.00.

Conclusion

The temporary pause in U.S. strikes on Iran eased geopolitical concerns, pushed oil prices lower and placed pressure on the U.S. dollar.

However, the dollar’s next major move will likely depend on the Federal Reserve’s policy decision and guidance later this week.

Source: Reuters