The U.S. dollar weakened on Wednesday as a pullback in oil prices helped improve risk sentiment ahead of a series of key central bank policy meetings.
Dollar slips as oil prices ease
The decline in crude oil prices provided some relief to global markets, encouraging a modest return of risk appetite. This shift weighed on the safe-haven dollar, which had previously gained support from rising geopolitical tensions.
Yen, euro gain ground against dollar
The dollar fell against the Japanese yen, which rebounded from levels that had previously raised concerns about potential intervention by Japanese authorities. The move comes ahead of a scheduled meeting between U.S. President Donald Trump and Japanese Prime Minister Sanae Takaichi in Washington.
The euro also strengthened, marking its third consecutive session of gains as investors look ahead to the European Central Bank’s upcoming policy meeting.
Safe-haven demand still supports dollar
Despite recent weakness, the dollar has remained broadly supported since the start of the U.S.-Israel conflict with Iran nearly three weeks ago. Elevated oil prices during the conflict boosted demand for the greenback as a safe-haven asset.
However, oil prices fell by more than $2 per barrel after Iraqi and Kurdish officials agreed to resume exports through Turkey’s Ceyhan port, easing supply concerns.
Currency markets show mixed moves
The dollar index edged down slightly to 99.51, extending its decline for a third straight session. Meanwhile:
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The euro rose to $1.1543
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The yen strengthened to 158.64 per dollar
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The British pound gained to $1.3368
Commodity-linked currencies also advanced, with the Australian dollar and New Zealand dollar posting modest gains as risk sentiment improved.
Outlook tied to central bank signals
Looking ahead, markets are focused on upcoming policy decisions from major central banks, including the U.S. Federal Reserve, European Central Bank, Bank of England, and Bank of Japan.
All are widely expected to keep interest rates unchanged. Instead, investors will closely watch for guidance on inflation and economic outlook, particularly in light of ongoing tensions in the Middle East.
Forex outlook amid geopolitical risks
Analysts suggest that even if the conflict settles into a prolonged stalemate, equities could recover, supporting risk-sensitive currencies. At the same time, currencies of oil-importing economies—such as the yen and euro—may also benefit.
However, downside in USD/JPY could remain limited, as Japan’s government is believed to prefer a weaker yen to support economic growth.
Crypto market update
In the cryptocurrency market, Bitcoin slipped 0.5% to around $74,184, while Ethereum edged slightly higher to $2,329.
