FOREX-Dollar under pressure as oil prices slump, Australia rate decision awaited

‌The ​dollar wavered alongside oil prices on Tuesday on hopes for a diplomatic breakthrough between the US and Iran, while the Aussie was steady ahead of the Reserve Bank of Australia's rate decision.

Brent ‌crude futures plunged more than 7% on Monday in their sharpest single-day drop in months, after Tehran said its contacts with the US aimed at ending their eight-month war were continuing. Falling energy prices helped ease inflation concerns and dragged longer-dated US Treasury yields lower.

The yield on the ‌benchmark US 10-year Treasury note was steady at 4.9145%, while that on the 30-year bond was also flat at 5.2868%. Both had ‌dipped to their lowest levels in nearly two months in the previous session. The dollar index, which measures the currency against a basket of currencies including the yen and the euro, last traded a shade weaker at 101.76 after dropping to a one-month low on Monday.

Meanwhile, an AI-driven stock market slump showed little sign of slowing down, ⁠hurting ​risk sentiment and lending some support to ⁠the dollar. Tensions around US midterm elections also loom large, helping to prop up the dollar as a safe-haven play. "Oil relief is growing, but conviction elsewhere ⁠remains thin," Sim Moh Siong, FX strategist at OCBC, said in a note.

"Cheaper energy is reshaping FX dynamics, while AI concerns and US election risks ​reinforce our view that the USD remains supported." The euro was a touch higher at $1.1185 on the back of dollar weakness.

The Japanese ⁠yen was flat at 157.915 per dollar during a local holiday. ANOTHER ROUND OF CENTRAL BANK MEETINGS

Multiple central banks are scheduled to issue policy statements this week, including ⁠those ​in Britain, Australia, Norway and Sweden. The Reserve Bank of Australia is expected to raise the official cash rate by 25 basis points to 4.85% on Tuesday, which would be the highest level since December 2008. The move would bring total tightening this year across ⁠five increases to 125 basis points.

The Australian dollar was little changed at $0.7002 . The kiwi was flat at $0.5617. Sterling strengthened 0.05% to $1.3414 after PMI ⁠data showed British manufacturers started the ⁠final quarter of 2026 with the strongest output growth in more than two years.

Economists polled by Reuters expect the Bank of England to raise its Bank Rate to 4.0% from 3.75%, the first ‌hike since August 2023, ‌when inflation was still more than triple its 2% target.