The U.S. dollar maintained a firmer tone against most G10 currencies on Tuesday, though trading ranges remained narrow as consolidation continued for a third consecutive session. Geopolitical tensions in the Middle East eased slightly after reports that Iran and Oman were discussing an interim framework to reopen the Strait of Hormuz, while the U.S. signaled no imminent escalation by preparing for diplomats to return to regional embassies.
Trade frictions between the U.S. and Canada intensified after failed negotiations reignited a trade war, pushing the Canadian dollar to a fresh weekly low. The greenback traded near CAD1.3870, up from last week’s settlement near CAD1.3760. Broader support for the dollar came from firmer U.S. interest rates, with analysts noting scope for additional gains in North American trading.
In G10 currency pairs:
The euro consolidated above $1.1660 after trading in a 30-pip range above $1.1650 on Monday. It held below $1.1680 and remained heavy early Tuesday, with options totaling about €1 billion at $1.1675 expiring during the session.
The dollar strengthened against the yen, briefly rising above the 20-day moving average near ¥158.75 for the first time since last month’s intervention. The yen weakened despite a rise in Japanese rates, with the dollar hovering around ¥159, where options worth approximately $985 million expired.
Sterling remained under pressure, fraying support at $1.3620 after consolidating within Monday’s range of $1.3620–$1.3655. A break below this level could expose $1.3580–$1.3600, with options for £525 million at $1.3625 rolling off.
The Australian dollar recovered to $0.7185 after briefly dipping below $0.7140, supported by firmer July CPI data. It has not traded above $0.7200 since late May.
Emerging market currencies showed mixed performance. The Mexican peso consolidated near the upper end of its recent range, trading between MXN16.9250 and MXN16.9660, after appreciating 2.4% this month. The offshore yuan steadied within a CNH6.7150–CNH6.7210 range, while India’s rupee gained 0.35% as oil prices pulled back and central bank intervention persisted.
Global equities edged higher as European and U.S. bond yields stabilized, with Asia-Pacific bourses mostly rising except in Australia, India, and Singapore. Benchmark 10-year yields in South Korea and New Zealand fell by more than four basis points, while U.S. 10-year yields held near 4.65% after closing at 4.63% on Monday.
Commodities showed divergent moves. Gold consolidated near $4600 after failing to sustain gains toward $4700, while silver rebounded from a three-day low near $67.45 to trade above $69. West Texas Intermediate crude fell to $79.60, retracing over half of its August 5–month-to-date advance.
U.S. economic data due at 8:30 ET included personal consumption expenditures, expected to rise 0.1% month-over-month, and the core PCE deflator, forecast to increase 0.2%, keeping the year-over-year rate steady at 3.3%. Mexico’s central bank is scheduled to release its quarterly inflation report late in the North American session, which may include updated macroeconomic forecasts.
Australia’s July CPI rose 1.0% month-over-month, slowing the year-over-year rate to 3.5%, the slowest pace since November 2023. Japan’s leading economic indicators and PPI service prices showed little market reaction, though swaps markets continue to price an 85% chance of a Bank of Japan rate hike next month.
