US Dollar: Limited downside as Fed caution persists – OCBC

FXStreet Insights Team FXStreet

OCBC’s Sim Moh Siong argues that recent risk-on moves following the US‑Iran understanding have only produced a modest pullback in US yields and the Dollar. He highlights AI-driven US growth, Fed event risk and Oil dynamics as supporting USD resilience. The bank remains neutral on the Dollar and prefers FX cross trades over outright USD shorts.

USD resilience despite risk-on backdrop

"The limited pullback in US yields and a resilient USD suggest markets remain cautious on hawkish Fed risks. Strong AI-driven investment continues to support labour demand and reinforces the resilient US growth outlook relative to peers. Positioning also looks constrained ahead of this week’s FOMC meeting, reducing appetite to sell the USD into a key policy event."

"Oil dynamics also limit USD downside. Brent has fallen to around USD83 per barrel, near many year-end forecasts. We expect Brent to drift towards USD80 by year-end, with risks skewed higher."

"Limited USD Pullback: Energy prices fell sharply and risk assets rallied after the US and Iran agreed on a memorandum of understanding on 14 June, with signing targeted for 19 June. US yields and the broad USD eased only modestly, despite a sharp rebound in EM oil importer currencies such as IDR, INR and PHP."

"While a US-Iran agreement is supportive, durability remains untested. Even if the Strait of Hormuz reopens, normalisation will be gradual. Mine clearance, insurance reinstatement, restarting shut-in production and precautionary stockpiling are likely to slow further downside in oil prices."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

USD/JPY stays below 160.50 as markets assess BoJ decision

USD/JPY fluctuates in a relatively narrow range above 160.00 on Tuesday as markets assess the Bank of Japan's (BoJ) decision to raise the policy rate by 25 at the June meeting. Meanwhile, investors keep a close eye on news coming out of the Middle East, while preparing for the critical Fed meeting.

AUD/USD trades in tight channel near 0.7050 despite hawkish RBA message

AUD/USD trades modestly lower on the day at around 0.7050 on Tuesday as markets adopt a cautious stance amid a lack of details surrounding the US-Iran peace agreement. The Reserve Bank of Australia (RBA) left the door open for possible policy tightening after leaving the interest rate unchanged, as expected, at the June meeting but failed to boost the Australian Dollar.

Gold: Recovery remains capped by $4,400 for now

Gold continues to trade with a constructive tone and flirts with the $4,350 zone per troy ounce on Tuesday. The early enthusiasm sparked by the US-Iran peace deal has faded somewhat, prompting investors to adopt a more prudent stance as they await further details of the agreement and key guidance from the Fed.

Solana's rebound gains momentum as ETF inflows return

Solana (SOL) steadies at $73 after posting three consecutive green candlesticks since the weekend. The recent recovery is supported by institutional demand, with spot Exchange Traded Funds recording net inflows of $2.81 million on Monday.

BoJ just hiked and US-Iran deal is on the table: Why Japanese Yen is still around 160.00

The Bank of Japan lifted interest rates from 0.75% to 1.00%, its highest level in more than three decades. The landmark move aims to stabilize a sharply weakening Japanese Yen, but by looking at the immediate market reaction, it doesn’t look like it’s going to work.

Why a hawkish RBA is no longer enough to lift the Australian Dollar

The Reserve Bank of Australia delivered more than what markets expected: a hawkish hold that should have supported the Aussie. But markets widely ignored it, focusing instead on slowing economic growth and proving that central bank messaging alone isn’t always enough to drive currencies.