Dollar Weakens Slightly as Bond Market Selloff Shows Signs of Cooling

The U.S. dollar moved lower on Monday but remained close to the strong levels reached last week, as pressure in global bond markets appeared to ease after recent sharp selloffs.

The U.S. Dollar Index, which measures the greenback against a basket of major currencies, declined 0.2% to 99.08 by 10:11 ET.

Meanwhile, the euro gained 0.2% against the dollar to trade at $1.1644, while the British pound climbed 0.5% to $1.3390.

Middle East Tensions Continue to Influence Currency Markets

Geopolitical developments remained a key driver for investor sentiment.

Over the weekend, a drone strike caused a fire at a nuclear facility in the United Arab Emirates, while Saudi Arabia reported intercepting three drones.

The incidents raised fresh concerns over the stability of the fragile ceasefire between Washington and Tehran.

U.S. President Donald Trump stated on social media that “the clock is ticking” for Iran to reach a peace agreement with the United States or potentially face renewed military action.

At the same time, the Strait of Hormuz — a critical route for nearly 20% of global oil shipments — remained largely closed to tanker traffic, increasing fears over energy supply disruptions.

Oil Prices Retreat While Bond Yields Ease

Oil prices reversed earlier gains after Iranian media reported that the United States may temporarily ease sanctions on Iranian oil exports until a broader peace agreement is finalized.

The decline in oil prices contributed to a pullback in global bond yields, helping calm markets after several days of heavy bond selling.

Lower bond yields reduced some pressure on financial markets and weakened demand for safe-haven assets.

Why the Dollar Has Remained Relatively Strong

Despite Monday’s decline, analysts noted that the U.S. dollar has remained resilient throughout the recent geopolitical tensions.

The greenback has benefited from its traditional safe-haven status, while investors also view the U.S. economy as somewhat protected from energy shocks due to America’s role as a major oil and energy exporter.

This perception has helped support the dollar even amid heightened uncertainty.

Investors Watch G7 Meeting and U.S. Position on Iran

Market participants are closely monitoring this week’s meeting of finance ministers from the Group of Seven (G7) nations in Paris.

Officials are expected to discuss the ongoing conflict involving Iran and potential economic implications.

Ahead of the meeting, Treasury Secretary Scott Bessent stated that he would urge international officials to continue enforcing U.S. sanctions aimed at limiting financial support flowing to Tehran.

Japanese Yen Near Weakest Levels in Months

Elsewhere in currency markets, the Japanese yen hovered near its weakest point against the U.S. dollar since April 29.

The currency’s weakness has prompted speculation that Japanese authorities could intervene again, following reported actions in late April and early May intended to stabilize the yen.

Investors remain alert for any potential policy response from Japan if depreciation pressures continue.