The US dollar declined slightly as of 7:55 AM ET on the 13th, with the dollar index falling to 100.196 from the previous close of 100.963. The decline occurred as crude oil prices reduced gains amid possibilities of diplomatic solutions to the ongoing US-Iran military conflict. The Japanese yen faced downward pressure following reports that Japan's Government Pension Investment Fund (GPIF) has no immediate plans to change its target asset allocation.
Dollar Index Records 0.047% Decline Amid US-Iran Tensions
According to Yonhap Infomax, the dollar index (DXY) reflecting the dollar's value against six major currencies stood at 100.196 as of 7:55 AM ET on the 13th, up 0.047 points (0.047%) from the previous close of 100.963. The US and Iran continue military confrontations, with the US attacking Iran over the weekend and Iran retaliating against US military bases in the Middle East region.
The Islamic Revolutionary Guard Corps (IRGC) Navy stated on the 13th that "the Strait of Hormuz remains closed," citing Article 5 of the Memorandum of Understanding (MOU) between the US and Iran. In contrast, US President Donald Trump told NBC in an interview the previous day that the Strait of Hormuz is "open."
Iranian spokesperson Esmail Baghaei said in a media briefing on the 13th, "We will use military means to defend our interests whenever necessary, and we will use diplomatic means where the situation requires and national interests demand." This statement suggests Iran is not ruling out diplomatic methods.
WTI Crude Retreats to $73 Range After Hitting $75.08
West Texas Intermediate (WTI) crude for August delivery rose to $75.08 per barrel amid US-Iran tensions but reduced gains after Baghaei's remarks, trading in the $73 range. The dollar index also came under downward pressure, falling below the 101 level.
Thomas Mathews, Asia-Pacific Markets Head at Capital Economics, stated, "In the last war, the dollar was clearly the biggest beneficiary, but this time we're starting from a position where the dollar has already strengthened considerably, and Federal Reserve policy outlook has already been significantly reassessed." He added, "Even if the situation continues to deteriorate, it's not certain the dollar will rise as much this time, and market movements so far seem to reflect that."
USD-JPY Rises 0.230% to 162.109 Following GPIF Asset Allocation Report
The USD-JPY exchange rate stood at 162.109 yen, up 0.372 yen (0.230%) from the previous session. Reuters reported, citing sources, that Japan has no immediate plans to change GPIF's target asset allocation and is considering expanding investments in domestic (Japanese) assets within the currently permitted range.
This news was somewhat disappointing compared to Finance Minister Satsuki Katayama's remarks that she would encourage pension funds including GPIF to make "much more investment" in Japanese financial assets. The USD-JPY rate rose to 162.355 yen during Asian trading.
Amir Anvarzadeh, strategist at Asymmetric Advisors, said, "GPIF won't sacrifice its operational principles just because the government wants it to," adding "the USD-JPY rate may be ahead of a significant upward breakout."
The USD-JPY rate later reduced gains after Chief Cabinet Secretary Minoru Kihara stated that GPIF routinely reviews its portfolio and "if adjustments are deemed necessary, the portfolio will be modified as I understand it."
Chris Turner, Global Markets Head at ING, mentioned the possibility of Japanese authorities intervening in the foreign exchange market this week but said "intervention alone cannot reverse the current upward trend in USD-JPY."
Euro Gains 0.107% Against Dollar While Pound Slips
The EUR-USD exchange rate stood at 1.14297 dollars, up 0.00122 dollars (0.107%) from the previous session. The GBP-USD rate was at 1.33941 dollars, down 0.00043 dollars (0.032%). The offshore USD-CNY (CNH) rate stood at 6.7799 yuan, down 0.0021 yuan (0.031%).
FAQ
What caused the US dollar to decline on the 13th?
The US dollar declined slightly as crude oil prices reduced gains amid possibilities of diplomatic solutions to the ongoing US-Iran military conflict. Iranian spokesperson Esmail Baghaei's statement indicating willingness to use diplomatic means where necessary contributed to easing oil price pressures, which in turn affected dollar movements.
Why did the Japanese yen weaken against the dollar?
The Japanese yen faced downward pressure after Reuters reported that Japan's Government Pension Investment Fund (GPIF) has no immediate plans to change its target asset allocation. This news disappointed market expectations following Finance Minister Satsuki Katayama's earlier remarks about encouraging pension funds to increase investments in Japanese financial assets, causing the USD-JPY rate to rise to 162.109 yen.
