FX.co ★ US Dollar Index Approaches 3-Year Low

The US dollar index declined to below 98.1 on Tuesday, nearing the three-year low of 97.6 observed on June 12th. This downward movement came as financial markets evaluated the repercussions of geopolitical tensions on the United States' monetary policy and international trade dynamics. Reports emerged suggesting that Israel and Iran might resume hostilities soon after reaching a ceasefire deal on Tuesday, raising doubts about the stability of conflict de-escalation. Previously, controlled confrontations between Iranian forces and US troops concluded without further escalation. Concurrently, oil prices dropped as tankers successfully traversed the Strait of Hormuz, alleviating inflationary concerns and strengthening the argument for the Federal Reserve to implement multiple interest rate reductions this year, thus exerting pressure on the dollar. Currently, the Federal Reserve is anticipated to execute two rate cuts in 2023, with the first potentially occurring as early as July.