BY COMFORT OGBONNA
The U.S. dollar declined against several major currencies in Asian trading on Monday after a temporary pause in U.S. military operations against Iran pushed oil prices lower and improved investor sentiment across global financial markets.
The move reflected growing hopes that tensions in the Middle East could ease after the United States halted its bombing campaign over the weekend. The decline in geopolitical risk helped reduce concerns about a possible disruption to global energy supplies, leading investors to move away from the dollar, which often benefits during periods of uncertainty.
Against the Japanese yen, the dollar fell 0.2% to 163.585 yen, marking its largest daily decline since July 10. The euro gained 0.3% against the dollar, reaching $1.1403, while the British pound advanced 0.2% to $1.3352.
Oil prices dropped sharply in early Asian trading as markets reacted to the reduced likelihood of immediate escalation in the conflict. Brent crude futures fell 4.2% to $92.74 a barrel after the United States temporarily suspended its two-week military campaign.
Iran also indicated that it would stop its own attacks if the United States maintained the pause, according to officials familiar with the situation. The development followed renewed diplomatic efforts aimed at restarting negotiations and finding a possible path toward ending the conflict.
Despite the market reaction, investors remained cautious about the future direction of the conflict and its potential impact on energy markets. Analysts said uncertainty remains high, particularly because any renewed military escalation could quickly reverse recent gains in market confidence and push oil prices higher.
Currency strategists said their outlook remains focused on the possibility of gradual de-escalation, which could continue weighing on oil prices and reduce demand for traditional safe-haven assets such as the U.S. dollar.
Other major currencies also strengthened slightly against the greenback. The New Zealand dollar rose 0.1% to $0.5791, while the Australian dollar gained 0.1% to $0.6996 as investors responded positively to the improved geopolitical outlook.
The U.S. dollar index, which measures the currency’s performance against a basket of six major currencies, was largely unchanged at 101.21 at the start of a week filled with major central bank meetings and economic updates.
Attention is now focused on the U.S. Federal Reserve’s upcoming policy meeting, where investors are looking for clues about the future direction of interest rates. Expectations for a possible rate increase have eased slightly compared with last week as lower oil prices reduce some inflation concerns.
Financial markets are currently pricing in a 33.7% chance of a 25-basis-point interest rate increase at the Federal Reserve’s next two-day meeting, down from 37.4% on Friday.
The shift in expectations reflects a more cautious approach among investors, who are weighing recent inflation data, economic conditions and geopolitical developments before making major market decisions.
In cryptocurrency markets, digital assets also benefited from the improved risk appetite. Bitcoin rose 1% to $65,286.74, while ether gained 1.7% to $1,945.22.
Markets are expected to remain sensitive throughout the week as investors monitor central bank decisions, developments in the Middle East and new economic data that could influence the outlook for interest rates, currencies and global growth.
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