The US dollar weakened against major currencies on Monday as investors shifted back to riskier assets following last week's selloff in AI-linked stocks. The shift came amid easing concerns about escalation in the Middle East conflict, particularly after US President Donald Trump indicated he was unlikely to order fresh attacks on Iran as long as diplomatic efforts continued. Trump was set to meet Qatar's Sheikh Mohammed to discuss ending the conflict.
The improved market sentiment weighed on the safe-haven dollar, while Brent crude futures fell 3.4% to $94.99 a barrel. The euro rose 0.57% against the dollar to $1.1204, and the dollar weakened 0.33% against the Japanese yen to 158.01. Enrique Diaz-Alvarez, chief economist at Ebury, noted that the market is heavily positioned in the dollar, making it difficult for the currency to rally. He expects the euro to rebound over the medium term due to a stronger-than-expected recovery in the eurozone.
Sterling also gained 0.5% to $1.3415, while the dollar index, which measures the currency against six major rivals, dipped 0.37% to 101.84. Wall Street's main indexes were higher, led by the tech-heavy Nasdaq, which rebounded after last week's selloff. Diaz-Alvarez suggested that the market may be underestimating the impact of the midterm elections on US economic performance, particularly in AI investment.
Investors are now focusing on Tuesday's US consumer price index data, expected to show a monthly rise of 0.3%. Futures indicate an 82% chance of a Federal Reserve rate hike on December 9, up from a week earlier. The yield on benchmark US 10-year notes rose 1.07 basis points to 4.87%. The risk-sensitive Australian and New Zealand dollars also rallied, with the Aussie up 0.80% to $0.6912 and the kiwi jumping 1.29% to $0.5616, as traders assessed the implications of New Zealand's weekend elections.