The dollar slipped in volatile trading on Monday as investors watched for signs of escalation in the conflict between Israel and Iran and prepared for a busy week of central bank meetings.
The potential for disruptions in the Strait of Hormuz, a key oil shipping route, raised concerns about economic risks in the Middle East.
The dollar fell 0.3% to 143.73 yen after an earlier gain of nearly 0.4%. The euro rose 0.5% to $1.1604. The dollar also weakened against the Swiss franc, trading at 0.8104, while the dollar index, which tracks the currency against six major peers, dropped 0.5% to 97.74.
Despite rising tensions in the Middle East, demand for traditional safe havens such as the U.S. dollar and Treasuries remained muted. Oil prices declined 3.3% on Monday after climbing 7% on Friday following Israel’s strike on Iran. Gold prices also edged lower.
Risk-sensitive currencies gained. The Australian dollar rose 0.9%, the New Zealand dollar increased 1.2%, and the Norwegian crown added 0.3%, reaching its highest level since early 2023 earlier in the session.
On Friday, the dollar had strengthened after U.S. President Donald Trump’s comments on global trade created uncertainty. However, traders remained cautious about the dollar’s direction, awaiting clarity on tariff issues, especially with the July 9 deadline for reciprocal tariffs approaching.
Central bank policy meetings will be in focus this week. The Federal Reserve will announce its interest rate decision on Wednesday. Markets expect no change, but investors will watch for comments on economic trends and inflation.
The Bank of Japan is also set to deliver its policy decision on Tuesday, with expectations for no major changes. Other central banks, including those in the UK, Switzerland, Sweden, and Norway, will announce their decisions later in the week.
Markets are also tracking potential developments on U.S. trade deals, especially with the European Union and Japan. Any progress in upcoming meetings on the sidelines of the G7 summit in Canada could influence market sentiment.
