United States Dollar Index falls to three-week low amid signs of US-Iran war de-escalation

The US Dollar (USD) extends its losing streak for the third trading day on Friday amid signs of de-escalation in the ongoing clash between the United States (US) and Iran.

In the Asian session, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.3% lower to near 100.60, revisiting the three-week low.

Earlier in the day, reports from the Times of Israel stated that a US official signaled that Washington is still committed to the memorandum of understanding (MoU) with Iran and technical talks are still on despite US President Donald Trump declaring that the MoU is over and the exchange of attacks between the two.

On Wednesday, US President Trump also said that Iran called for making a deal, but “I just don’t know if they’re worthy of making a deal”.

Signs of US-Iran war de-escalation diminish the safe-haven appeal of the US Dollar. However, higher oil prices due to renewed energy supply disruption fears have de-anchored inflation projections, which are likely to limit the US Dollar’s downside.

Technically, higher inflation expectations discourage Federal Reserve (Fed) officials from lowering interest rates.

On the monetary policy front, Fed Chair Kevin Warsh has unveiled members of five task forces, as promised in the June policy announcement, which will be focused on communications, the balance sheet policy, improving the quality and timeliness of economic data, productivity and jobs and developing inflation frameworks.