(Bloomberg) — The dollar fell after US President Donald Trump said he would postpone strikes against Iranian energy targets, prompting energy prices to decline.
The Bloomberg Dollar Spot Index declined 0.4% Monday in New York trading, reversing gains from earlier in the session when it touched the highest level since December. Trump cited talks about ending the conflict that were later downplayed by Iranian media, but that was enough to bring relief. Brent crude fell sharply to below $100 a barrel and US Treasuries rebounded, sending yields across the curve lower on Monday, while stocks gained.
“The situation remains fluid and Trump’s remarks have helped reverse the moves,” said Jayati Bharadwaj, head of FX strategy at TD Securities. “If there is an off ramp to the war in the coming weeks in line with what is being indicated, we expect selling pressure in the dollar to resume.”
The dollar rose 1.5% since the war started and surging energy prices helped support the oil-exporting US economy. Options traders had been betting on further gains in the greenback, but scaled back those expectations Monday following Trump’s comments. Demand for protection against abrupt moves in the greenback rose.
The US is speaking with a “top person” in Iran and is not speaking with the Supreme Leader, Trump said, adding that the Strait of Hormuz will be open very soon.
“Without much more detail it’s difficult to interpret what these remarks mean,” said Shaun Osbourne, chief foreign exchange strategist at Scotiabank. “But a solid rebound in risk is developing along with a meaningful drop in the dollar.”
–With assistance from Carter Johnson and Miles J. Herszenhorn.
(Updates prices throughout.)
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