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2026-05-25 20:19:40
[Dollar weakens amid volatility, oil prices fall below $100, Hormuz reconciliation expectations roil currency markets] ⑴ On Monday, international oil prices fell below $100 per barrel as markets hoped for an agreement to resume navigation in the Strait of Hormuz, causing the dollar to weaken against major currencies, despite both the US and Iran downplaying the possibility of a short-term agreement. ⑵ Due to holidays in the US, UK, and many parts of Europe, market liquidity was thin. The dollar fell 0.2% against the yen to 158.89, the euro rose 0.40% to 1.1649, the pound rose 0.55% to 1.35044, and the Australian and New Zealand dollars rose 0.64% and 0.5% respectively. ⑶ Strategists at the Commonwealth Bank of Australia pointed out that if a peace agreement is ultimately reached, the dollar will weaken for a period, but "once the shock subsides," the dollar will strengthen again due to the better fundamentals of the US compared to other major currencies. (4) From a trading psychology perspective, the plunge in oil prices (Brent crude fell 5.8% to $97.61 in a single day) has temporarily lowered inflation expectations, prompting the market to withdraw its bets on a 2027 rate hike. This has provided breathing room for risk assets, but has also marginally weakened the demand for the US dollar as a safe haven. (5) The US statement over the weekend was inconsistent: on Saturday it said the memorandum had been "basically agreed upon," while on Sunday it said the blockade of Iranian ships would be "fully effective" until the agreement was signed. The market has become accustomed to being patient with substantial breakthroughs, but generally believes that the baseline scenario for an agreement remains solid.
