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Dollar Drops as Iran Ceasefire Prompts risk-on Turn for Markets

A portrait of George Washington is displayed on a stack of US one-dollar bills in Dallas, Tuesday, April 7, 2026. (AP Photo/LM Otero)
A portrait of George Washington is displayed on a stack of US one-dollar bills in Dallas, Tuesday, April 7, 2026. (AP Photo/LM Otero)
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Dollar Drops as Iran Ceasefire Prompts risk-on Turn for Markets

A portrait of George Washington is displayed on a stack of US one-dollar bills in Dallas, Tuesday, April 7, 2026. (AP Photo/LM Otero)
A portrait of George Washington is displayed on a stack of US one-dollar bills in Dallas, Tuesday, April 7, 2026. (AP Photo/LM Otero)

The dollar sank to its lowest level in a month while the euro, yen, Aussie and sterling rallied hard in Asian trading on Wednesday after US President Donald Trump said he had agreed to a two-week ceasefire with Iran.

The yen strengthened 0.8% against the greenback to 158.36 per dollar. The euro was up 0.7% at $1.1674, while the British pound appreciated 0.8% to $1.34. The Australian dollar climbed 1.1% to $0.7054.

Trump had earlier threatened widespread attacks on Iran's civilian infrastructure, drawing international condemnation after issuing an extraordinary warning that "a whole civilization will die tonight" ⁠if his demands ⁠were not met.

Investors' risk appetite rapidly returned after the ceasefire announcement, less than two hours before Trump's deadline for Tehran to reopen the Strait of Hormuz would have expired, Reuters reported.

If the strategic waterway is reopened, "we could be able to consolidate the risk-on rally that we're seeing," said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.

"But a lot has to happen in the next 14 days," he said, adding ⁠that currencies would be vulnerable to a retracement of their recent moves in the interim. "Markets still need to proceed with a degree of skepticism."

Traders' attention turned to central banks' next moves as oil prices fell sharply. Brent crude slid 13.4% to $94.68 a barrel but was still well above pre-war levels.

The kiwi dollar climbed 1.5% to $0.5819, extending gains after the Reserve Bank of New Zealand kept its policy rate at 2.25% on Wednesday for a second straight meeting, choosing to sit tight as it gauges the economic fallout from the war. But the central bank signaled it is ready to act if inflation pressures intensify.

Fed funds futures are pricing coin-toss ⁠odds that the Federal ⁠Reserve could cut rates by at least 25 basis points at its December 9 meeting, compared to an implied 74.5% probability a day earlier that the US central bank would remain on hold, according to the CME Group's FedWatch tool.

The US dollar index, which measures the greenback's strength against a basket of six currencies, weakened for a third consecutive day to lows of 98.838, its weakest since March 11.

Elsewhere, the won strengthened 1.6% to 1,477.10, its biggest one-day appreciation since the Iran war began and shrugging off fresh geopolitical tensions on the Korean peninsula. South Korea's military said North Korea fired several ballistic missiles toward the sea off its east coast on Wednesday, following a separate launch detected a day earlier.

Cryptocurrencies also rallied, with bitcoin advancing 2.9% to $71,327.07, and ether climbing5.6% to $2,233.90.

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IEA Cuts 2026 Oil Demand Forecast Again as Hormuz Remains Shut

Boats and a vessel in the Strait of Hormuz, as seen from Musandam, Oman, August 3, 2026. (Reuters)
Boats and a vessel in the Strait of Hormuz, as seen from Musandam, Oman, August 3, 2026. (Reuters)
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IEA Cuts 2026 Oil Demand Forecast Again as Hormuz Remains Shut

Boats and a vessel in the Strait of Hormuz, as seen from Musandam, Oman, August 3, 2026. (Reuters)
Boats and a vessel in the Strait of Hormuz, as seen from Musandam, Oman, August 3, 2026. (Reuters)

The International Energy Agency on Wednesday sharply reduced its forecast for global oil demand this year, as supplies remain crimped by the closure of the Strait of Hormuz and high prices deter buyers.

Demand is expected to slump by 1.6 million barrels per day (mb/d), compared with its forecast slump of one million barrels in its previous monthly report in July.

Crude prices have remained well above levels seen before the US and Israeli attacks on Iran in late February, sparking a war that has seen Iran launch attacks at several Gulf countries.

Tehran also responded by effectively shutting down tanker and cargo traffic in the Strait of Hormuz, through which around one-fifth of global oil supplies usually transit.

"The ongoing closure of the Strait of Hormuz and elevated fuel prices continue to weigh on oil consumption," the Paris-based IEA said.

Despite a purported ceasefire and repeated claims that a deal to open the strait was imminent -- what the IEA referred to as "sudden diplomatic pivots" -- only a handful of ships are being let through, leading to volatile pricing on global oil markets.

The IEA said global supplies rose by 2.4 million barrels per day in July, to reach 101.5 mb/d, but that was still 6.3 mb/d lower than a year ago.

But "renewed hostilities and maritime disruptions in July and early August undermined the recovery efforts," the agency said.

It now expects global supply to fall by 4.3 mb/d on average this year, before recovering next year.

On the demand side, the IEA is projecting a return to growth in the fourth quarter of this year.

Business

Oil Rises After Attacks on Ships in Hormuz, Bab el-Mandeb

A drone view of drilling rigs in Midland, Texas, US, June 11, 2025. (Reuters)
A drone view of drilling rigs in Midland, Texas, US, June 11, 2025. (Reuters)
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Oil Rises After Attacks on Ships in Hormuz, Bab el-Mandeb

A drone view of drilling rigs in Midland, Texas, US, June 11, 2025. (Reuters)
A drone view of drilling rigs in Midland, Texas, US, June 11, 2025. (Reuters)

Oil prices rose on Wednesday after attacks on two ships reinforced worries about disruptions to Middle East supplies, while industry data showing swelling inventories of US crude might keep bulls in check.

Brent futures were up 90 cents, or 1%, at $89.81 a barrel by 0757 GMT, set for their sixth day of gains. US West Texas Intermediate (WTI) crude climbed 88 cents, ‌or 1.1%, to $84.08, ‌up for a fifth day. Both contracts earlier ‌rose ⁠more than $1.

The United States ⁠and Yemen's Iran-aligned Houthis reported separate attacks on shipping in the Strait of Hormuz and the Bab el-Mandeb Strait on Tuesday, two crucial export valves for Middle Eastern oil and gas in addition to the Suez Canal.

Iran's top security official said Hormuz would stay closed unless the US accepted Iran's conditions to end the war, including release of its frozen ⁠assets.

Shipping data showed the number of vessels transiting ‌Hormuz fell to a one-week low of ‌eight on Tuesday. Before the war, 125 to 140 vessels passed through the ‌crucial waterway each day.

In Libya, the country's National Oil Corporation ‌said all fires at fuel storage tanks in the Zawiya oil complex were under control.

On the supply front, a Reuters poll showed that US crude oil and fuel inventories were expected to have fallen last week.

However, market sources citing ‌American Petroleum Institute data said US crude inventories rose sharply, while gasoline and distillate stocks fell.

Crude stocks rose ⁠by about 9.1 ⁠million barrels, while gasoline and distillate inventories fell by 1.5 million barrels and 596,000 barrels, respectively, from the previous week, the sources said.

The crude build far exceeded expectations and, if confirmed by the Energy Information Administration report later on Wednesday, could ease market concerns about supply tightness, Haitong Futures said in a note.

Official numbers from the EIA, the statistical arm of the US Department of Energy, are due at 10:30 a.m. ET (1430 GMT).

For longer-term supply, the EIA expected significant disruptions to Middle East crude supplies to persist through the end of 2027. The EIA said it expects 2026 Brent crude oil prices to average $86.81 a barrel, and WTI to average $80.88.

Business

US Consumer Prices Likely Increased Moderately in July as Gasoline Prices Eased

A woman shops for food items from a wholesale retailer in Alhambra, California on August 11, 2026. (AFP)
A woman shops for food items from a wholesale retailer in Alhambra, California on August 11, 2026. (AFP)
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US Consumer Prices Likely Increased Moderately in July as Gasoline Prices Eased

A woman shops for food items from a wholesale retailer in Alhambra, California on August 11, 2026. (AFP)
A woman shops for food items from a wholesale retailer in Alhambra, California on August 11, 2026. (AFP)

US consumer prices likely increased moderately in July, which could further reduce financial market expectations for the Federal Reserve to raise interest rates this year.

The Labor Department's Consumer Price Index report on Wednesday would follow on the heels of news last week of surprise job losses last month.

Economists said the United States' position as a net oil exporter and the drawing down of petroleum inventories had cushioned the hit on the economy from the oil price shock sparked by the Middle East conflict.

Still, they viewed inflation risks as tilted to the upside, with no resolution to the US-Israeli war with Iran. President Donald Trump accused Iran of being "devious negotiators" in an interview released late on Monday and described some of his current options in the war — "just bop along" and let Tehran fail economically or hit them "really, really hard."

"I don't ‌expect any significant ‌firework when the numbers come out," said Sung Won Sohn, a finance and economics ‌professor at ⁠Loyola Marymount University. "I ⁠don't really see the Fed either raising or lowering interest rates, unless things turn out badly for both unemployment and the CPI."

The CPI likely rebounded 0.1% last month, a Reuters survey of economists predicted, after falling 0.4% in June - the first decline in six years. In the 12 months through July, the CPI was forecast to have increased 3.4% after advancing 3.5% in June.

The anticipated small monthly increase in the CPI would reflect a further decline in gasoline prices, which averaged $4.064 a gallon in July compared to $4.184 in June, according to data from the Energy Information Administration. Gasoline ⁠prices have dropped from an average of $4.609 a gallon in May.

Food prices likely ‌increased marginally, in line with their recent trend. Goods prices, including ‌household furniture and apparel amid the fading pass-through from tariffs, will likely account for the moderate rise in the CPI.

INFLATION STILL ‌RUNNING ABOVE TARGET

Outside the volatile energy and food components, the CPI was forecast to rise 0.2% last month ‌after being unchanged in June. That would translate to a year-on-year increase of 2.5% in the so-called core CPI inflation.

The US central bank tracks the Personal Consumption Expenditures price indexes for its 2% inflation target. While cooler inflation readings could further temper rate hike expectations, they would likely be of little comfort to consumers, with wages not keeping up with prices.

"It's an improvement, but ‌both of those numbers are still extremely high and unpleasant for consumers," said Tani Fukui, an economist at MetLife Investment Management.

The high cost of living has ⁠soured many Americans' views ⁠of Trump, and could weigh on the Republican party's chances in the November midterm elections that will determine control of the US Congress for the next two years.

Trump won the 2024 presidential election in large part because of his promise to lower inflation.

Core inflation was seen lifted by rebounds in the prices of used cars and trucks as well as education and communication goods. Increases were also expected in airfares.

A mild pick-up in rents was anticipated, but economists were divided on whether prices for hotel and motel rooms would continue their decline.

Still, benign core CPI inflation readings were unlikely to be replicated in the core PCE price measure, which left some economists to continue to expect the Fed to tighten monetary policy in September.

Prior to the data, economists forecast core PCE inflation rising 0.2% over the month after gaining 0.1% in June. That would translate to a year-on-year increase of 3.3%, which would match June's rise. Components in the core basket have different weights in the core CPI basket.

"A report in line with our expectations would strengthen the case for the Fed hiking in September," said Stephen Juneau, a U.S. economist at Bank of America Securities.