The Dollar Index trades near 99.50, roughly a tenth of a percent lower, having opened directly on its 200-day Exponential Moving Average (EMA) and failed there inside the first minutes, with a session low just above 99.25 taking out the August range.
That is the tape on the day a 60-day framework meant to end the war over the Strait of Hormuz expires with nothing agreed to replace it, which is not how a haven currency is supposed to behave on a deadline
The haven bid went somewhere else A senior Iranian official told Reuters the country may move from a defensive policy to an offensive one should diplomacy fail, escalating both in the Strait and across the wider region, and three vessels crossed the waterway on Sunday against a five-day average of 12 and roughly 130 a day before the war. Crude Oil firmed on the headlines, with West Texas Intermediate (WTI) near the $83.00 handle and Brent above the $88.00 handle. On paper this should pay the Dollar twice over.
Haven flow is the obvious leg and the terms-of-trade leg is the stronger one, because the United States exports energy on net while the euro area imports the barrels that move through that chokepoint. Instead the Euro trades at a two-month high, the Pound sits near three-month peaks and Gold is bid, which is the signature of a market that has stopped buying safety and started selling one currency. The rate premium left the price last week The Dollar had carried a hike premium since the July 29 meeting, where three policymakers dissented in favour of a quarter point against a committee that held.