By Chibuike Oguh
NEW YORK, June 9 (Reuters) – The dollar edged lower against peers on Tuesday amid a fragile Middle East truce and with investors looking ahead to key U.S. data later in the week.
U.S. President Donald Trump said Iran had shot down a U.S. Apache helicopter in the Strait of Hormuz and vowed to respond, deepening doubts about prospects for peace between the two countries.
The episode comes after Israel and Iran halted direct attacks on each other on Monday following an appeal by Trump. However, Israel struck the historic port city of Tyre in southern Lebanon on Tuesday, killing at least eight people, in an escalation that complicates efforts to broker a broader peace deal.
The dollar pared losses following Trump’s comments. It tends to weaken against peers when tensions in the Middle East ease, as prospects for a peace deal can dampen oil prices.
“There’s a strange calm coming over the marketplace when it relates to the Iran conflict,” said Amo Sahota, executive director at Klarity FX. “Both parties are trying to avoid a major escalation; Trump in particular wants to avoid a super spike in oil prices. He’s actually under a lot of pressure here.”
The U.S. economy is seen as relatively insulated from energy shocks compared with its peers, a factor that has supported safe-haven demand for the dollar during the Iran war, while weighing on the euro and Japanese yen.
The euro was 0.07% stronger against the dollar at $1.15435, after hitting a two-month low in the previous session. Against the Swiss franc, however, the dollar edged higher by 0.07% to 0.79825.
U.S. Treasury yields jumped on Friday after data showed employers added far more jobs than expected in May, strengthening expectations that the Federal Reserve could raise interest rates later this year.
Investors are now focused on U.S. inflation data due on Wednesday for further signals on the Fed’s policy path. Fed funds futures indicate a roughly 70% chance of a rate hike by December, according to CME FedWatch.
“The market had to digest last week’s rather strong non-farm payrolls report, which is a lot stronger than expected,” said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey. “Certainly, there are geopolitical tensions that have been the case for months now, and we’re in the same push-pull situation that we’ve been hearing over and over again. But the market is focused on the resilience of the U.S. economy.”
The U.S. dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was down 0.09% at 99.95 after reaching 100.21 on Monday, its highest level since April 6.
