Dollar Stabilizes as US Reaffirms FX Intervention

Dollar Stabilizes as US Reaffirms FX Intervention

The Dollar Index edged up 0.1% on Tuesday, recovering a fraction of its recent decline and ending a week of losses. The euro was little changed, holding near $1.1510 as investors weighed elevated Eurozone inflation figures against expectations of further European Central Bank rate hikes later this autumn. Across major G‑10 pairs, foreign‑exchange trading remained confined to narrow ranges.

Risk appetite was restrained by mixed signals surrounding U.S.–Iran negotiations after President Donald Trump cited “last chance” talks to reopen the Strait of Hormuz, a claim subsequently denied by officials in Tehran. The geopolitical uncertainty blunted the risk‑on momentum that typically follows falling energy prices.

Attention is shifting to a dense calendar of U.S. labor‑market indicators, beginning Tuesday with the June JOLTS job‑openings report, trade‑balance data, and factory‑orders figures. Investors are searching for signs of cooling labour demand to confirm whether the Federal Reserve will maintain its restrictive interest‑rate stance ahead of Friday’s crucial non‑farm payrolls report.

"The tailwind to the dollar from resilient US economic activity is offset by Fed Chair Kevin Warsh failure to turn tough inflation rhetoric into a credible policy," said Elias Haddad, global head of markets strategy at Brown Brothers Harriman.

In Asia, the Japanese yen retreated nearly 0.4% to trade around 157.7 per dollar, giving back a portion of its recent gains after soaring almost 5% over the prior three sessions. The currency remains under intense scrutiny following joint market intervention by Japanese and U.S. authorities, with U.S. Treasury Secretary Scott Bessent reiterating that Washington stands ready to participate in further coordinated action if disorderly market moves re‑emerge.

The South Korean won’s USD/KRW pair edged 0.3% lower, while the Indian rupee’s USD/INR pair was flat as focus turned to the Reserve Bank of India’s policy decision due on Wednesday. A Reuters poll of economists expects the RBI to leave its benchmark repo rate unchanged at 5.25%, with inflation remaining within the central bank’s tolerance band despite rising above its 4% target in June.

The Australian dollar’s AUD/USD pair rose 0.2%.