US FX WRAP: Dollar dragged down by lower yields and oil prices
USD weakness returned as near-term hawkish bets eased on optimism over the reopening of the Strait of Hormuz. Oil prices tumbled, giving short-end notes the room to run higher, in turn, weighing on the dollar. Reporting suggests Iran and Oman are to make an announcement soon regarding their plan to manage the Strait of Hormuz; meanwhile, the Qatari's said language had been drafted for a possible US-Iran deal. Meanwhile, the latest labour data showed JOLTS falling more than expected in June to 7.359mln (exp. 7.45mln) with the quits rate unchanged and the vacancy rate moving slightly lower.
Antipodes outperformed amid improved risk sentiment on equities, stronger-than-expected Household Spending data, and higher precious metal prices. ING writes that NZD/USD may remain around the 0.585-0.590 range for now, but a "September hike delivered with a slightly dovish tone could prompt some correction and open the door to a period of AUD outperformance relative to NZD".
JPY strength took a break on Tuesday as volatile USD/JPY moves were absent. Main updates came via US Treasury Secretary Bessent, who largely reiterated his positive view of the currency and Japan's economy. He noted that the US would not have joined [in JPY intervention] if it was not optimistic about Japanese policies; it would do whatever it takes to support Japan. USD/JPY now trades around 157.79 from the Monday low of 155.226.
Wraps of this kind, where the dollar's move is framed as a yield story rather than a data story, tend to reverse quickly if the underlying driver shifts: lower oil prices ease near-term inflation expectations, pull front-end yields down, and compress the rate differential that has carried the dollar, a transmission channel that has recurred whenever geopolitical risk premia in energy markets unwind. The Hormuz reopening angle fits a familiar pattern in which de-escalation headlines hit crude first and the dollar second, with the move prone to fading on any walk-back or delay in implementation, so the quality of the Iran and Oman announcement matters more than the headline itself. The soft JOLTS print adds a second leg, since falling vacancies have historically fed expectations of a looser labour market and reinforced dovish repricing at the short end. The Bessent remarks on Japan are the more durable thread: explicit US endorsement of Japanese policy, and the open reference to joint intervention support, is the kind of official framing that has tended to cap USD/JPY upside around psychologically important levels even as carry dynamics argue the other way. Worth noting is the rate disparity within the session itself, yen strength pausing while antipodeans outperform on risk and metals, which is consistent with a broad dollar-soft, risk-on tape rather than a currency-specific catalyst. The follow-ons are the confirmation or denial of the Hormuz plan, further labour data against the JOLTS signal, and any additional Treasury or Japanese official commentary on intervention thresholds.