Dollar steady as first round of US-Iran talks ends, pound dips on Starmer uncertainty

By Ankur Banerjee

SINGAPORE, June 22 (Reuters) – The dollar was steady on Monday after the first round of U.S.-Iran talks ended, although threats from President Donald Trump to restart the war in the Middle East and Tehran’s announcement it had closed the vital Strait of Hormuz left investors nervous.

A joint statement from mediating nations Qatar and Pakistan said the U.S. and Iran agreed to a roadmap toward a final deal within 60 days, providing hope for an eventual resolution of a conflict that has cast a shadow over the global rates outlook.

The parties agreed to a mechanism to end the fighting in Lebanon and opened a communications line to help ensure safe passages for commercial ships through the contested strait, the statement said.

Oil prices fell over 1% after the announcement with Brent crude futures last at $79.36 a barrel. [O/R]

“The physical market remains tight and that should provide some support, but flows in FX and commodities, particularly gold, will continue to be heavily influenced by developments in the energy complex,” said Chris Weston, head of research at Pepperstone.

Sterling eased 0.21% to $1.32103 as traders assessed the political tumult in Britain, where Prime Minister Keir Starmer was considering his political future after rival Andy Burnham’s decisive election victory to parliament.

OCBC currency strategists do not expect the pound’s initial negative reaction to extend far, and retain a neutral view on the currency.

“Current signals suggest Burnham would adhere to the existing fiscal framework, although delivery will matter more than guidance,” they said in a note.

YEN NEAR 40-YEAR LOW

The euro cut its losses to fetch $1.14647. The risk-sensitive Australian dollar was flat at $0.7011 having dipped earlier in the session, while the New Zealand dollar last bought $0.573.

The Japanese yen slipped to 161.55 per dollar, hovering near a two-year low reached last week. A break beyond 161.96 would take the yen to its weakest level since 1986.

Japanese Finance Minister Satsuki Katayama said on Monday that authorities were prepared to respond appropriately to currency moves at any time, reiterating their previous stance.

“The MOF may be getting sore necks watching USD/JPY surge into the 2024 high,” said Matt Simpson, senior market analyst at StoneX. “Yet they may also feel powerless to do anything about it — as intervening against the tide of a hawkish Fed and strong U.S. fundamentals could prove costly and futile.”

The yen has erased gains made after a round of interventions from April 30, as a hawkish tilt by the Federal Reserve has led traders to ramp up bets on rate increases this year.

Shen Li, head of foreign exchange sales for APAC at State Street, said the dollar/yen moves fundamentally come down to interest rate differentiation.

“A lot of the eyes are on the Federal Reserve, how they’re going to shift their policy … I think the upward pressure for dollar/yen will continue.”

Treasuries remained under pressure on Monday with yields on 2-year notes rising to their highest since early 2025 at 4.2276%. Traders are anticipating 43 basis points of hikes this year with a 25 bps increase fully priced in by September.

(Reporting by Ankur Banerjee in Singapore; Editing by Himani Sarkar and Muralikumar Anantharaman)