The Dollar Declines, Weighed Down by Falling Energy Prices After Iranian Strikes in Qatar

The dollar fell on Monday, after a strong start to the trading session, as the currency lost ground amid a drop in oil prices.

Oil prices had surged starting June 13, following initial Israeli strikes against Iranian nuclear infrastructure.

This had driven the dollar higher, as a significant rise in prices could lead the Federal Reserve (Fed) to refrain from lowering interest rates. The US currency also benefited from its status as a safe haven amid uncertainties.

However, on Monday, oil prices plummeted by over 7% following Iran's response to US bombings over the weekend, with traders noting that, at least for now, there was no risk of disruption to global supply.

"This is hurting the dollar," explained Adam Button from ForexLive to AFP.

After being in the green during the early trading hours, the US dollar fell by 0.45% against the euro to 1.1576 dollars and by 0.54% against the pound to 1.3525 dollars around 19:00 GMT.

The decline in oil prices, combined with comments from several Fed officials, "has led the market to substantially reconsider the trajectory of US interest rates," noted Mr. Button.

"If inflation pressures remain contained" ahead of the next Fed meeting on July 29 and 30, "I will support a reduction in the key interest rates" at that time, stated Michelle Bowman, the vice president of the institution in charge of banking supervision.

Last Friday, another Fed member, Christopher Waller, had already mentioned a potential interest rate cut at the end of July.

However, most analysts still expect the monetary institution to reduce its rates only in September, according to CME's FedWatch tracking tool.

Monday's Rates Friday's Rates

19:00 GMT 21:00 GMT

EUR/USD 1.1576 1.1523

EUR/JPY 169.14 168.34

EUR/CHF 0.9403 0.9426

EUR/GBP 0.8559 0.8565

USD/JPY 146.13 146.09

USD/CHF 0.8123 0.8178

GBP/USD 1.3525 1.3451