US Dollar Index weakens below 98.50 as Israel‑Iran ceasefire boosts risk appetite

• The US Dollar Index edges lower to around 98.25 in Tuesday’s Asian session. 

• Trump announced a ceasefire between Israel and Iran, weighing on the US Dollar. 

• Fed’s Bowman said Monday she would favor an interest rate cut at the next policy meeting in July so long as inflation pressures stay muted.

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, loses ground to near 98.25 after US President Donald Trump announced the Israel-Iran ceasefire. Investors await Chair Powell’s semiannual testimonies and the US June Consumer Confidence report later on Tuesday for fresh impetus.

Trump said late Monday that a complete ceasefire between Israel and Iran will go into effect in order to end the conflict between the two nations. White House officials stated that Israel agreed to a ceasefire so long as Iran does not launch further attacks, while Iran has signaled to the US no further attacks will take place. The easing tension in the Middle East undermines safe-haven currencies like the US Dollar (USD). 

Additionally, the dovish comments from the US Federal Reserve (Fed) policymakers contribute to the Greenback’s downside. Fed’s Vice Chair for Supervision Michelle Bowman noted on Monday that the US central bank should consider interest rate cuts soon, as risks to the job market may be on the rise. Last week, Fed Governor Christopher Waller said that the Fed is in a position to cut the policy rate as early as July.

On the other hand, the uncertainty surrounding the Israel and Iran ceasefire and any signs of renewed tensions could boost the safe-haven flows, supporting the US Dollar in the near term. The Israel Defense Forces (IDF) said early Tuesday that it had identified missiles launched from Iran toward southern Israel a short while ago.