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Dollar stumbles as Strait of Hormuz deadline passes without a deal

The DXY fell around 0.1% and briefly traded below its 200-day EMA as Iran warned it could escalate if diplomacy fails, while oil prices firmed.

Reported · Written up by our desk · Major Pairs

The US Dollar Index was seen near 99.50, down roughly 0.1%, after opening directly on its 200-day exponential moving average and slipping below it within the first minutes. The move pushed the session low just above 99.25, taking out the August range, with the dollar failing to act like a typical safe-haven around a key deadline tied to the Strait of Hormuz.

The focus is a 60-day framework meant to end the war over the Strait of Hormuz expiring with nothing agreed to replace it. Ahead of the expiry, a senior Iranian official told Reuters the country may shift from a defensive policy to an offensive one if diplomacy fails, and three vessels crossed the waterway on Sunday versus a five-day average of 12 and roughly 130 a day before the war.

FXStreet also noted that oil prices firmed on the headlines, with West Texas Intermediate near the $83.00 level and Brent above $88.00. Even so, the euro rose to a two-month high, the pound stayed near three-month peaks, and gold was bid, suggesting traders were not buying into dollar safety.

Attention then turned to shifting rate expectations in the US. FXStreet cited weaker US data, including a soft CPI and PPI and a 0.6% contraction in July retail sales, which reduced September hike odds from about a coin flip on August 10 to roughly a third by Friday, while the Empire State manufacturing survey showed a 20.6 reading versus an 11 consensus and 15.6 in July. The article flagged Wednesday as the first major test for whether the repricing will continue.

Latest closeGold $4,432.00 ▲1.6%|Brent $88.59 ▲1.8%|Dollar index 99.64 ▼0.3%

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