Dollar weakens against euro, yen as Iran talks lift risk appetite

The US dollar weakened against major currencies, including the euro and the Japanese yen, on Monday, November 9. Reuters reported that easing concerns about an escalation in the Middle East conflict prompted investors to rotate back into risk assets. This followed a selloff the previous week in stocks linked to artificial intelligence.

The improved mood weighed on the dollar, which is often treated as a safe haven. According to Reuters, the euro was last up 0.57% against the dollar at $1.1204. The dollar fell 0.33% against the yen to 158.01. Sterling rose 0.5% to $1.3415. The dollar index, which measures the US currency against six major rivals, dipped 0.37% to 101.84 at the time of the Reuters report. Brent crude futures fell 3.4% to $94.99 a barrel.

A daily market recap from Babypips, published after the close, described a broader move. It said reports that talks to reopen the Strait of Hormuz may be moving forward probably drove oil down about 4%. It said cheaper oil likely eased inflation worries and helped the S&P 500 rise about 2.4%, even as Nvidia slid. Babypips put the Dollar Index near 101.67 at the close, down 0.6% on the day. It said the US dollar weakened against every major currency, and that the New Zealand dollar led with a gain of about 1.4%. Babypips said the Australian dollar rose about 0.9%, the euro and pound each gained about 0.7%, and the yen rose about 0.4%. These figures are approximate closing levels and differ slightly from the intraday numbers in the Reuters report.

Gold also moved higher. Babypips said gold climbed about 1.9% to near $4,140. Trading Economics reported that gold rose to $4,141.37 per troy ounce on November 9, up 1.74% from the previous day. It noted that the gain came despite a stronger-than-expected US employment report released on Friday. That report reinforced expectations of higher interest rates for longer, which supported the dollar and Treasury yields. Trading Economics said CME FedWatch showed markets pricing an 81% probability of a Fed rate hike in December. It also cited World Gold Council data showing China's central bank bought 25.8 metric tons of gold in October, its largest monthly addition in three years.

Market positioning was one theme in the Reuters report. Enrique Diaz-Alvarez, chief economist at Ebury, said the actively trading and speculating part of the market is very long the US dollar. In his view, that makes it difficult for the dollar to rally. He said Ebury expects the euro to rebound over the medium term because the market may be underestimating the strength of the recovery in the euro zone. That is one analyst's view, and it is not a forecast of what will happen.

FXEmpire noted that a softer dollar during an equity recovery does not necessarily mean markets have abandoned expectations of tighter US monetary policy. It said reduced demand for defensive dollar holdings can temporarily outweigh interest-rate support. It also put the 10-year Treasury yield near 4.84%, slightly lower on the day.

The next focus for currency and gold markets is Tuesday's US consumer price index release. According to a Reuters poll cited in the report, it is expected to show a monthly rise of 0.3%. Inflation data can influence expectations for Federal Reserve policy, which in turn affects the dollar, bond yields and gold. Market reactions to such data can be unpredictable, and nothing in Monday's moves guarantees how prices will behave afterward.

This article is a summary of market news for information only. It is not financial advice or a recommendation to buy or sell any currency or commodity.

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