The Dollar steadied in Asian trading on Friday, recovering part of the previous day’s losses as market participants cast doubt on reports suggesting that a ceasefire agreement in the Middle East may be close.
Against the Japanese Yen, the US Dollar rose 0.2% to 160.235 Yen. Whereas the Australian Dollar slipped 0.1% to $0.7045, and the New Zealand Dollar weakened by 0.2% to $0.5824.
The Euro last traded at $1.1574, staying close to its highest level in a week following the European Central Bank’s first interest rate increase in three years on Thursday. The British Pound remained unchanged at $1.3415.
Brent crude fell 1.8% to $88.76 per barrel in Asian trading after US President Donald Trump said the United States and Iran could reach a peace deal as early as this weekend, potentially reopening the Strait of Hormuz to shipping. Iran, however, said it had not made a final decision on any agreement, Reuters reports.
Meanwhile, the US Dollar index, which tracks the greenback against a basket of six major currencies, held steady at 99.743, stabilising after dropping to its weakest level in a week on Thursday.
Data released that day showed that US producer prices rose more than expected in May, marking the strongest annual increase in 3½ years as the Middle East conflict pushed up energy costs.
However, traders drew some reassurance from the underlying details of the report
The more closely watched core PPI figure, which is often used as a leading indicator for core PCE inflation, rose 4.9% year-on-year, below the expected 5.4%.
Together with the decline in energy prices, this helped ease concerns about persistent inflationary pressure.
Expectations for the timing of the Federal Reserve’s next rate move were pushed back to December following the report. Fed funds futures now imply a 63.3% chance that the US central bank will keep rates unchanged at its two-day meeting ending on 28th October, compared with even odds a day earlier, as per the CME Group’s FedWatch tool.
In contrast, the European Central Bank is now broadly expected to raise interest rates again in September, based on LSEG data.
“The ECB delivered its first 25-basis-points hike since September 2023, with inflation and growth revisions hawkish at the margin,” according to analysts from Barclays. “That said, it offered little guidance on if and when it will follow with more, though risks seemed skewed towards further action, barring a quick improvement in the inflation outlook.”