Dollar Falls as Oil Drops on Hormuz Deal Hopes

Dollar Falls as Oil Drops on Hormuz Deal Hopes

The dollar weakened against major currencies on Monday as hopes for a deal to reopen the Strait of Hormuz pushed oil prices below $100 per barrel, despite the U.S. and Iran downplaying the chances of a near-term agreement.

Thin Holiday Trading

Many markets, including the U.S., Hong Kong, Britain, and much of Europe, were closed for public holidays, reducing liquidity. The dollar fell 0.2% against the yen to 158.91. Japan announced it would build $19 billion in reserves to subsidize fuel costs.

Euro and Sterling Gain

The euro rose 0.33% to $1.1641, and the British pound gained 0.55% to $1.3499. The Australian dollar advanced 0.58%, while the New Zealand dollar added 0.5%. The U.S. dollar index fell about 0.3% to 98.969.

Iran Deal Prospects

U.S. Secretary of State Marco Rubio said there would either be a good agreement or Washington would deal with Iran in 'another way.' Iran stated that conclusions had been reached on many topics but that it was not close to signing. CBA analyst Samara Hammoud expects the USD to weaken initially if a peace deal is secured, then strengthen again due to better fundamentals.

Oil Prices Tumble

Brent crude fell 5% to $98.43 a barrel, while U.S. WTI dropped 4.8% to $88.83. Over the weekend, signals were mixed: President Trump said a deal was 'largely negotiated' but later stated the blockade would remain until an agreement is signed.

Pepperstone's Chris Weston noted that if Brent drops toward $90, risk assets could revive. ECB's Yannis Stournaras indicated a cautious monetary tightening if inflation overshoots. Traders await U.S. ADP employment data and euro zone confidence surveys this week.