Dollar Falls Amid Dimming Rate Hike Bets, Iran Conflict Looms Large

The US dollar has been weak against its peers due to dwindling bets on rate hikes by the Federal Reserve. Despite rising slightly on Tuesday, it remained near multi-month lows as investors scaled back expectations of a rate increase.

Data in recent weeks have shown a softer US economy, including unexpected job losses and mild inflation readings. This has led traders to reduce their bets on a rate hike at the Fed's September meeting, with only a 35% chance now expected compared to 52% a week ago.

The euro eased away from two-month highs of $1.161 touched on Monday but was last little changed at $1.157. Sterling dipped 0.1% to $1.352 due to weak UK labour market data. Bond traders, however, are more concerned about the impact of the Middle East war on inflation.