SINGAPORE, May 19 – The American dollar recovered from recent losses during Tuesday’s Asian trading session after U.S. President Donald Trump announced he had postponed military action against Iran to pursue diplomatic negotiations, while bond markets stabilized following a two-day decline.
The U.S. dollar index, which tracks the currency’s performance against six major currencies, remained stable at 99.026, drawing investor interest after reduced concerns about military escalation caused the index to drop 0.3% on Monday, ending a five-day rally.
“Sentiment stabilised after reports that the U.S. President had called off a planned strike on Iran following appeals from Persian Gulf leaders,” Westpac analysts wrote in a research note.
The 10-year U.S. Treasury bond yield decreased 3 basis points to 4.591%, pulling back from its highest point in a year as concerns about persistent inflation growth subsided. Brent crude oil prices dropped 2.4% to $109.43 per barrel.
Over the previous week, the dollar had strengthened as investors sought safety amid Middle East conflict escalation and a global bond market selloff, as markets reassessed the likelihood that central banks might need to intervene to control inflation while the Strait of Hormuz remained blocked and energy markets faced disruption.
Federal funds futures indicate a 36.2% likelihood of a 25-basis-point increase at the U.S. central bank’s December 9 two-day meeting, up from just 0.5% probability one month earlier, based on the CME Group’s FedWatch tool.
The dollar remained unchanged against the yen at 158.895 yen following Tuesday’s government data showing Japan’s economy expanded at an annualized 2.1% rate in the first quarter, exceeding the median market prediction of 1.7% growth.
Japanese Finance Minister Satsuki Katayama informed reporters on Monday that Japan remains prepared to counter excessive currency market volatility whenever necessary, while ensuring any intervention to strengthen the yen and reduce dollar holdings avoids driving up U.S. Treasury yields.
Market participants continue monitoring for additional intervention signals to bolster the yen, which remains only marginally stronger than before Japanese authorities began their first market intervention in nearly two years last month.
Central bank data suggests Tokyo may have allocated close to 10 trillion yen ($63 billion) since initiating its most recent yen-purchasing intervention on April 30.
The euro stayed flat at $1.1650, while the British pound declined 0.1% to $1.3427.
The Australian dollar fell 0.1% to $0.7164, while the New Zealand dollar dropped 0.1% to $0.5868.
The U.S. dollar maintained its position at 6.798 yuan against the Chinese currency in offshore trading.
Bitcoin rose 0.2% to $77,005.69, while ether increased 0.8% to $2,131.91.
