US Dollar Strength Driven by Geopolitical Risk

The US Dollar saw safe-haven demand amid geopolitical tensions, particularly after Iran confirmed it is considering new service fees for ships passing through the Strait of Hormuz. This risk environment contributed to subdued trading for the Euro and British Pound, which held within narrow ranges against the dollar. The greenback’s strength came despite its proximity to two-week lows, as market expectations for further US rate hikes have receded.

Oil Prices Rise Despite OPEC+ Production Increase

West Texas Intermediate (WTI) crude oil prices extended gains for a third day, trading near $69 per barrel. The price increase occurred despite an agreement by OPEC and its allies to raise their collective output targets starting in August. This market reaction suggests traders are weighing the planned production hike against other factors, such as ongoing geopolitical developments impacting key oil transit routes.

Weakness Across Asia-Pacific and Commodity Currencies

Several currencies in the Asia-Pacific region and commodity-linked economies depreciated against the US dollar. The Australian and New Zealand dollars declined following the release of soft domestic inflation and commodity price data, while the Japanese Yen weakened under pressure from high import costs. In other market news, the Canadian Dollar lost ground despite higher oil prices, China's central bank set a weaker fix for the yuan, and South Korea launched 24-hour trading for the dollar-won pair.