The dollar dropped against other major currencies on Monday, as a pause in U.S. bombing in Iran dragged oil prices lower and lifted risk appetite ahead of a busy week of central bank meetings.
Against the yen JPY=, the U.S. dollar was down 0.1% at 163.645 yen, on course for its sharpest daily decline since July 10. The euro EUR= was up 0.2% at $1.130, while the pound GBP= pared early gains and eased about 0.1% to $1.331.
Oil prices sank, with Brent crude LCOc1 tumbling 7.5% to $89.42 per barrel after the U.S. military temporarily halted its two-week-long strikes. Tehran said it would also halt attacks if the U.S. maintained the pause, raising hopes for renewed diplomatic efforts to de-escalate the conflict.
The dollar index =USD, which measures the U.S. currency's strength against a basket of six others, dipped 0.1% to 101.34 ahead of the Federal Reserve's July 28-29 policy meeting.
With new Fed Chair Kevin Warsh providing few clues on the policy outlook, investors have adjusted expectations for interest rates several times this month, first after a softer-than-expected consumer inflation report and then in response to an escalation in U.S.-Iran hostilities that briefly lifted crude above $100 a barrel.
Traders see a roughly 33% chance of a quarter-point Fed rate hike on Wednesday, down from 37% at the end of last week but double the probability seen a week ago, according to CME Group's FedWatch tool.
"It could be that the market is not particularly well-informed after this meeting because Warsh doesn't like to give forward guidance, and there is so much uncertainty, particularly with respect to how long the Iran war will last," said Jane Foley, head of FX strategy at Rabobank.
Bullish bets on the dollar against other major currencies climbed to their highest level since 2015 NETUSDG10=, with speculators' net long positions surging to $45.37 billion in the week ended July 20, Commodity Futures Trading Commission data showed.
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