Key Takeaways

• Dollar steady: The DXY and dollar index futures hovered around 99.2, retaining most gains from the past two sessions.
• Euro and pound tick up: Both currencies rose slightly; the yen held flat near the 160 danger zone.
• Iran messaging halt: Iranian media reported Monday that Tehran stopped negotiating with the U.S., citing Israeli hostility in Lebanon.
• Trump’s mixed signals: The president said talks were “progressing rapidly” and expected a deal “over the next week,” while Iran made no official comment.
• Lebanon partial ceasefire: The Hezbollah-Israel truce offered some de-escalation, but broader Middle East tensions persist.
• Hawkish Fed bets underpin dollar: Markets continue to price in a prolonged Iran war fueling inflation and keeping rates elevated.
• Treasury yields near peaks: Yields remain close to recent highs on rate hike expectations.
• Nonfarm payrolls Friday: May’s jobs report is widely expected to factor into the Fed’s rate path.
• Yen near 160: USD/JPY approached the level that triggered tens of billions in Tokyo intervention in early May.
• Katayama warns: Japan’s Finance Minister said authorities stand ready to intervene to stem further yen weakness.
• Aussie firms: AUD/USD rose 0.1% after RBA board member Ian Harper warned of sticky inflation that could prompt more rate hikes.
• Indian rupee and Korean won firm: USD/INR rose 0.1%; USD/KRW rose 0.1% even as South Korean CPI came in hotter than expected for May.

The dollar steadied on Tuesday amid growing uncertainty over the status of U.S.-Iran peace negotiations, with broader currency markets also moving in tight ranges amid heightened caution.

Markets remained on edge after Iranian media reported on Monday that Tehran had ceased negotiating with the United States as a response to increased Israeli hostility in Lebanon.

U.S. President Donald Trump offered conflicting signals on talks with Iran, adding to market uncertainty.

Dollar Steady with Focus on U.S.-Iran Talks

The dollar index and dollar index futures hovered around 99.2 points, retaining most of their gains from the past two sessions.

The euro and pound rose slightly. The Japanese yen was flat after Finance Minister Satsuki Katayama said authorities were ready to intervene in currency markets to stem further yen weakness.

Reports on Monday said Iran had stopped messaging the U.S. through mediators — sparking questions over whether a peace deal was as close as U.S. officials had earlier claimed.

Trump said on Monday he expects a peace deal over the next week, and that talks with Iran were “progressing rapidly.” But Iran made no official comment on negotiations.

While a partial ceasefire between Hezbollah and Israel heralded some de-escalation in the conflict, broader tensions in the Middle East persisted — especially after the United States and Iran traded air strikes earlier in the week.

The dollar remained upbeat as markets bet that a prolonged U.S.-Iran war will underpin inflation and present a more hawkish outlook for the Federal Reserve and other central banks.

Treasury yields had also risen sharply on this notion in recent weeks, and remained close to recent peaks on Tuesday.

Beyond the war and inflation, focus this week is also on nonfarm payrolls data for May, due on Friday. The print is widely expected to factor into the Fed’s plans for interest rates.

Yen Muted Amid Intervention Chatter; Aussie Firms

Broader currency markets moved in a tight range on Tuesday. The Japanese yen’s USD/JPY pair was flat, but came back within striking distance of the 160-yen level.

That threshold had elicited tens of billions of dollars in currency market intervention by Tokyo in early May, with recent comments from Japanese officials suggesting that more intervention may be on tap.

The Australian dollar’s AUD/USD pair rose 0.1% after Reserve Bank of Australia board member Ian Harper warned of sticky inflation — a trend that could draw more interest rate hikes from the central bank.

The Indian rupee’s USD/INR pair rose 0.1%, while the South Korean won’s USD/KRW also rose 0.1% even as consumer inflation read hotter than expected for May.