The US dollar weakened slightly on the 8th afternoon as President Donald Trump stated he does not want a prolonged conflict with Iran, causing international oil prices to moderate their earlier surge. At 4pm ET on the 8th, the dollar index (DXY) fell 0.083% to 100.972, reversing from an intraday high of 101.274, after West Texas Intermediate (WTI) crude oil pared gains from 8% to 4.37% following Trump's remarks that 'whatever happens will end very quickly' and 'we don't want a long-term war.' The dollar's retreat occurred amid heightened US-Iran tensions earlier in the session, when Trump threatened 'we will probably hit them hard tonight' and warned of potential attacks on Iranian infrastructure including power plants, bridges, and desalination facilities, briefly pushing WTI above $76 per barrel and dollar-yen to 162.701 yen.
Dollar Index Falls as Oil Surge Moderates
According to Yonhap Infomax (screen number 6411), the dollar-yen exchange rate stood at 162.477 yen at 4pm ET on the 8th, up 0.399 yen (0.246%) from the previous New York session close of 162.078 yen. The euro-dollar rate rose to 1.14276 dollars, up 0.00110 dollars (0.096%) from the previous session. The dollar index (DXY), which reflects the dollar's value against six major currencies, declined 0.084 points (0.083%) to 100.972. The pound-dollar rate increased to 1.34022 dollars, up 0.00408 dollars (0.305%), while the offshore dollar-yuan (CNH) rate rose 0.0006 yuan (0.009%) to 6.8042 yuan.
Trump Statements Shift from Threat to De-escalation
President Trump escalated tensions on the 8th by stating 'we will probably hit them hard tonight' and warning that the US could attack Iranian infrastructure including power plants, bridges, and desalination facilities if necessary. He also mentioned the possibility of resuming a naval blockade against Iran. These remarks caused WTI crude oil for August delivery to surge 8% at one point, exceeding $76 per barrel. Trump later softened his stance at a press conference, stating 'whatever happens will end very quickly' and 'we don't want a long-term war.' He reiterated 'whatever happens, it will end very quickly' and projected that 'the oil market will be the same. Oil supply will become very smooth. It will be supplied easily.' Following these remarks, WTI moderated its gains to approximately 4.37%, and the dollar index fell below 101 after reaching 101.274 intraday.
Analysts Assess Market Response to Trump Rhetoric
Jane Foley, head of FX strategy at Rabobank, stated 'the dollar reacted, but the market has now learned to discount Trump's remarks to some extent,' adding 'his remarks may be intended to bring the other party to the negotiating table. Nevertheless, market anxiety will rise one level higher.' Rob Haworth, senior investment strategist at U.S. Bank Asset Management, commented 'the market has now learned to look through this issue to some extent,' explaining 'the threats are meaningful, but this administration does not seem willing to drag the conflict out long-term.' Scotiabank stated in a report on the 8th that 'the pound-dollar exchange rate has clearly bottomed at 1.30 dollars,' attributing this to expectations that the Bank of England (BOE) will cut policy rates more slowly than the Federal Reserve (Fed).
FAQ
What caused the dollar to weaken on the 8th afternoon?
The dollar weakened after President Trump stated he does not want a prolonged conflict with Iran, which caused oil prices to moderate their earlier 8% surge to 4.37%. At 4pm ET on the 8th, the dollar index fell 0.083% to 100.972.
How did Trump's statements affect oil prices and the dollar index?
Trump's initial threat to 'hit them hard tonight' pushed WTI crude above $76 per barrel (up 8%) and the dollar index to 101.274. After he later stated 'whatever happens will end very quickly' and 'we don't want a long-term war,' WTI moderated to a 4.37% gain and the dollar index fell below 101.
