Dollar Index Slips to Six-Week Low Amid Hopes of Iran Talks

The U.S. Dollar Index (USDX) hit a six-week low on August 3, falling as much as 0.37% to 99.42. This decline came after four consecutive sessions of decline.

However, the dollar rebounded to around 99.80, erasing its morning losses, thanks to bargain-hunting buying and improved risk appetite. The market is optimistic about U.S.-Iran negotiations, with Trump announcing that he had canceled plans to strike Iran on Sunday.

The Federal Reserve's probability of a September rate hike remains high at 65%, which has supported the dollar. However, Commerzbank analysts warn that once tensions with Iran subside substantially, the U.S. dollar could come under renewed downward pressure.

The market is focused on two key variables this week: the ISM Manufacturing PMI and Friday's nonfarm payrolls report. Stronger-than-expected data in these reports could cap the dollar's downside.