Dollar Weaker as Uncertainty Mounts

Crude oil prices, which have been correlated with the Dollar’s movement over the last several days, have pared some recent gains as Traders attempt to assess to what degree this resurgence of hostilities between the U.S. and Iran will impact flows through the Strait of Hormuz. U.S. Central Command reported that it struck 90 targets on Wednesday, following the 80 targets struck on Tuesday, in an effort to ‘degrade’ Iran’s ability to attack commercial shipping. Iran responded in kind by attacking U.S. bases in Bahrain, Kuwait, and Qatar. President Donald Trump stated that the U.S. would win very quickly if the conflict were to return to all out war.

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NZD

The New Zealand Dollar is leading G10 gains for the second day in a row, reaching its strongest level in more than two weeks. The Reserve Bank of New Zealand hiked interest rates by 25 bps early yesterday, and RBNZ Governor Anna Breman gave a hawkish statement to local media following the meeting that economic recovery has been stronger than anticipated. This is underscored by data released overnight which showed that the manufacturing sector grew at the fastest pace in five years in June. Many Traders are now anticipating two further hikes this year as a result.

JPY

The Japanese Yen is up against the Buck this morning as Traders remain cautious of intervention from authorities. The Bank of Japan’s quarterly Sakura report released overnight held that all nine regional Japanese economies are at least on track with recovery, if not picking up, but continued to flag inflation risks. This supports the case for further rate hikes this year, with most Traders expecting one by year end. Tsutomu Watanabe, an economics professor at the University of Tokyo and former BoJ official, stated that he believes the central bank will need to accelerate the pace of rate hikes to prevent inflation from exceeding their target.