Diplomatic progress on reopening the Strait of Hormuz reduces demand for the USD, offsetting minor support from rising Treasury yields.
The US Dollar Index (DXY) declined for a second day, trading near 99.90 in Asian hours as safe-haven demand waned. Qatari officials reported an interim proposal to restore access to the Strait of Hormuz, with both the US and Iran signaling progress, following President Trump’s suspension of military strikes.
The drop follows a brief dip in the 10-year Treasury yield to 4.61% on Tuesday, driven by falling energy prices that eased inflation concerns. However, yields rebounded slightly, providing limited support to the USD. Fed’s Schmid reinforced caution, warning of persistent inflation risks despite recent sentiment shifts.
Markets remain cautious as diplomatic developments unfold, balancing geopolitical relief against monetary policy uncertainty.