Washington, DC – The US dollar and gold prices stabilized in Asian trading on Tuesday, following significant declines after US President Donald Trump announced the cancellation of a planned military strike against Iran. This decision was made to pave the way for diplomatic negotiations aimed at ending the US-Israeli conflict. As a result, hopes for de-escalation in the Middle East were bolstered.
Dollar performance, currency market, and Treasury bonds
The dollar index, which measures the performance of the US currency against a basket of six major currencies, rose slightly by 0.1% to trade at 99.076 points, ending a five-day winning streak as escalation fears subsided. A decline in oil prices also helped ease global inflation concerns. As a result, the yield on the benchmark 10-year US Treasury note fell to 4.59%. In the currency markets, the greenback’s performance was mixed:
The Japanese yen: The dollar rose against it to 158.95 yen, ignoring the fact that Japan’s economy recorded better-than-expected growth during the first quarter.
Euro and British Pound: The single European currency fell to $1.1644, while the pound sterling dropped to $1.3411.
Commodity-linked currencies: The Australian and New Zealand dollars saw a significant decline as investors awaited the implications of the war on inflation and central bank decisions.
Gold stagnates and precious metals decline
On the safe-haven side, spot gold prices were steady, edging down 0.1% to $4,560.39 an ounce by 02:28 GMT. This followed a dip to their lowest level since March 30. Meanwhile, U.S. gold futures for June delivery rose 0.1% to settle at $4,563.50. The appeal of the precious metal as an inflation hedge was also affected by a more than 2% drop in oil prices. Brent crude futures fell to $109.84 a barrel.
Investors’ eyes are on the Federal Reserve and the White House.
Global financial markets are cautiously awaiting the release of the minutes from the US Federal Reserve’s April monetary policy meeting on Wednesday, seeking new clues about the future path of interest rates. Meanwhile, the White House announced that economist Kevin Warsh will be sworn in as the new chairman of the Federal Reserve on Friday. This comes as the central bank faces increasing and complex pressure to balance curbing inflation with the need for interest rate cuts to support economic growth.
