The US Dollar remained near a 10-day low on Tuesday as investor sentiment improved following a preliminary agreement aimed at ending the conflict with Iran.
Meanwhile, the Japanese Yen remained close to the key 160-per-Dollar threshold after the Bank of Japan raised interest rates as anticipated, seeking to curb inflation risks linked to the unrest.
On Monday, US President Donald Trump announced that Washington and Tehran had signed a preliminary deal to halt hostilities in the Middle East. However, uncertainty surrounding the agreement persisted, with shipping companies warning that it could take weeks for market confidence to recover even if the Strait of Hormuz is reopened.
Investors are also keeping a close eye on a packed week of central bank decisions.
The Bank of Japan raised interest rates to their highest level in 31 years on Tuesday, a move that was widely anticipated by markets. Yet analysts focused on the board’s 7-1 vote, viewing it as a sign that some policymakers remain uncertain about when the next rate increase should occur, Reuters reports.
Market participants also closely monitored remarks from BOJ Deputy Governor Shinichi Uchida during his post-meeting press briefing.
“We will look at economic, price and financial developments, particularly with an eye on the Middle East situation, for the time being. We'll look at whether the economy and prices are moving in line with our forecasts, as well as risks. With underlying inflation approaching 2%, we need to be mindful of upward price risks. We will guide policy so that we won't fall behind the curve,” he said.
The Yen was little changed at 160.26 per Dollar, remaining close to the 160 level that has kept traders alert for the possibility of renewed currency intervention by Japanese authorities.
In Australia, the central bank kept interest rates unchanged following a unanimous vote, pausing after three straight rate hikes despite persistent inflation pressures. The Australian Dollar edged down 0.1% to $0.706.
Investors are now turning their attention to upcoming policy announcements from the Bank of England and the US Federal Reserve, both of which are scheduled later this week.
Although global markets showed cautious optimism following news related to Iran and oil prices retreated, movements in the currency market remained relatively muted as traders awaited guidance from central bank officials around the world.
The Dollar index, which tracks the greenback against a basket of six major currencies, held steady at 99.62.
Furthermore, the Euro edged slightly higher to $1.16, while the British Pound was little changed at $1.3418.