Dollar Rally Falters as Oil Retreat Eases Bond Rout
A recent surge in the US dollar has stalled as oil prices retreated, easing global bond selling and cooling down its momentum. This pullback is attributed to reports of talks between US and Iranian negotiators on a seven-day deal to reopen the Strait of Hormuz.
Despite this development, the dollar continues to receive support from widening US-G6 interest-rate differentials. However, this tailwind is tempered by tightening moves from other major central banks, which narrows policy divergence with the Fed and may prevent a sustained move above the dollar's June high.
Cross-border flows are acting as a counterweight to this cap, with foreign investors accumulating $1,754bn of long-term US securities in the 12 months to July. This disparity implies firm underlying demand for dollars, even as global monetary policy convergence constrains further upside.