US dollar weakens on potential US-Iran agreement but awaits critical CPI data for Fed policy signals.
The US dollar retreated broadly on Tuesday following reports of a drafted US-Iran deal, which raised hopes for geopolitical de-escalation. Qatari mediators indicated progress, while US Treasury Secretary Bessent confirmed a potential agreement could have been announced as early as Monday, including the reopening of the Strait of Hormuz. Losses moderated later as the expected timeline passed without confirmation, but optimism persists unless tensions resurface.
The upcoming US CPI report next week will be pivotal for Fed policy expectations ahead of the September FOMC meeting and Jackson Hole Symposium. A stronger-than-expected print could revive dollar strength by bolstering rate hike bets, while a softer report may ease tightening fears and weigh further on the currency.
On the yen front, recent BoJ intervention remains the focus, with Bessent’s remarks suggesting US support for faster Japanese tightening. Markets await further signals from Japan’s policy trajectory, though no immediate shifts have materialized since last week’s moves.