Forex Today: Fading hopes of a US-Iran deal weighs on market mood
Here is what you need to know on Tuesday, August 11:
Crude Oil prices surged higher on Monday and revived inflation fears as the latest headlines surrounding the conflict in the Middle East failed to offer any optimism. The US economic calendar will feature mid-tier data releases on Tuesday, such as the NFIB Business Optimism Index and Existing Home Sales for July.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.16% | -0.13% | 0.92% | -0.13% | 0.18% | 0.30% | 0.40% | |
| EUR | -0.16% | -0.29% | 0.73% | -0.38% | -0.05% | 0.04% | 0.14% | |
| GBP | 0.13% | 0.29% | 0.97% | -0.08% | 0.25% | 0.34% | 0.42% | |
| JPY | -0.92% | -0.73% | -0.97% | -0.74% | -0.41% | -0.46% | -0.32% | |
| CAD | 0.13% | 0.38% | 0.08% | 0.74% | 0.33% | 0.28% | 0.56% | |
| AUD | -0.18% | 0.05% | -0.25% | 0.41% | -0.33% | 0.09% | 0.16% | |
| NZD | -0.30% | -0.04% | -0.34% | 0.46% | -0.28% | -0.09% | 0.08% | |
| CHF | -0.40% | -0.14% | -0.42% | 0.32% | -0.56% | -0.16% | -0.08% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
After posting large losses in the previous week, the US Dollar (USD) Index recovered modestly on Monday. Early Tuesday, the USD Index stays slightly below 100.00.
Iran said on Monday that even if they reach a deal with Oman to manage the Strait of Hormuz, this by itself will not be enough to fully open the waterway until the US agrees to a list of conditions. In response to one of Tehran's demand for Washington to pay for damages, US President Donald Trump said that they will also seek compensation from Iran for casualties.
The barrel of West Texas Intermediate (WTI) rose nearly 7% on Monday and erased a large portion of last week's losses. At the time of press, the WTI was trading near $82.50, rising about 1.3% on the day.
Oil rally extends as Strait of Hormuz disruption bites into Iran exports
Analysts at Commerzbank note that the latest leg higher in crude has been driven by persistent tensions around the Strait of Hormuz, with "Brent crude oil prices rose 5.0% to USD87.72, as the Strait of Hormuz standoff showed no sign of resolution." They add that the supply impact is increasingly visible on the ground, pointing to fresh monitoring data: "Satellite imagery shows Iran's main oil export terminal at Kharg Island has been largely idle this month, underscoring the physical toll of the closure."
The Reserve Bank of Australia (RBA) announced that it left the Official Cash Rate (OCR) unchanged at 4.35% following the August policy meeting. In the policy statement, the RBA noted that inflation is still too high and they will remain focused on ensuring that high inflation does not become embedded in the economy. RBA Governor Michele Bullock noted in the post-meeting press conference that they will raise rates if needed. AUD/USD's reaction to the RBA event was largely muted and the pair was last seen trading virtually unchanged on the day near 0.7050.
RBA stance keeps Aussie under pressure as Commerzbank flags dovish tilt
Analysts at Commerzbank highlight that the latest RBA communication “does not read particularly hawkish,” noting that “the new forecasts revised the expected unemployment rate upward, while short-term inflation forecasts were revised downward.” According to the bank, “all in all, it must be said that the decision and the forecasts seem to be in line with market expectations; the AUD is showing little movement in its initial reaction, at least.” In their medium-term outlook, Commerzbank reiterates that they “continue to expect that the RBA’s next move will be an interest rate cut, so the AUD is likely to remain under pressure in the coming months.”
EUR/USD stays on the backfoot and trades marginally lower on the day below 1.1550 after closing in negative territory on Monday.
GBP/USD pulls away from the highest level it touched in nearly two months at 1.3530 on Monday and moves sideways at around 1.3500 in the European morning.
Gold (XAU/USD) extended its rally during the early trading hours of the Asian session and reached its strongest level since early June above $4,400 before reversing its direction. At the time of press, Gold was trading below $4,370, losing about 0.5% on the day.
USD/JPY holds steady above 159.00 early Tuesday following Monday's rally that saw the pair gain nearly 1% on the day.
Japan rate path and capital flows seen as key to JPY recovery
Analysts at OCBC reiterate that they "maintain our end-2026 USDJPY forecast of 163," but note that their stance on the Yen could shift if domestic policy dynamics evolve more favourably. They indicate they "could turn more constructive on the JPY if the Bank of Japan follows through with a more aggressive rate hike path and if policies that encourage GPIF and NISA-related flows back into Japanese assets materialise."
OCBC adds that "a September rate hike, combined with evidence of domestic investors reallocating capital back into Japanese assets, could drive a more sustained JPY recovery and provide longer-lasting relief for long-end JGB yields," underscoring the importance of both monetary tightening and renewed local demand for Japan’s bond and equity markets in anchoring the currency.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.