CANBERA (dpa-AFX) - The commodity currencies such as Australia, the New Zealand and the Canadian dollars weakened against their major currencies in the Asian session on Tuesday, as investors still remain cautious despite US President Donald Trump's announcement that a memorandum of understanding (MoU) has been reached to terminate the crisis and reopen the blockaded Strait of Hormuz.
Investors continue to be cautious as they wait for more information about Iran's unresolved nuclear program.
The interim peace accord between the US and Iran is set to be signed in Switzerland on Friday, though a memorandum of understanding has not yet been released. Today marks the day number 109 of the U.S.-Iran war which began on February 28.
The Strait of Hormuz is also set to reopen later this week and remain toll-free during a 60-day ceasefire period, easing concerns over global energy supplies and shipping disruptions.
Crude oil prices plummeted after the U.S. and Iran reached an agreement to end their conflict and allow the immediate resumption of trade via the Strait of Hormuz. West Texas Intermediate crude for July delivery was down $4.31 or 5.08 percent at $80.57 per barrel.
It is widely anticipated that the Federal Reserve (Fed) would maintain its benchmark interest rate at a target range of 3.50% to 3.75% on Wednesday. This could be because of the increased US inflation brought on by higher energy prices associated with tensions in the Middle East. In order to understand how incoming Fed Chair Kevin Warsh plans to guide the central bank into its next phase, traders will be intently watching the press conference.
In economic news, the Reserve Bank of Australia left its benchmark interest rate unchanged, as policymakers evaluate the effects of three consecutive rate hikes and the impact of oil supply disruption.
The policy board, governed by Michele Bullock, unanimously voted to hold the cash rate target at 4.35 percent. The bank had lifted the policy rate by 25 basis points each in February, March and May.
Data from the National Bureau of Statistics showed that China's retail sales declined for the first time since 2022 on subdued domestic demand, and fixed asset investment logged a sharper-than-expected fall, while industrial production remained a bright spot.
Retail sales decreased 0.6 percent from a year ago in May, reported. This marked a reversal from the 0.2 percent increase in April and sharper the expected 0.3 percent decline.
Meanwhile, annual growth in industrial production accelerated more than forecast to 4.5 percent from 4.1 percent in April. Production was forecast to grow 4.4 percent.
In the Asian trading today, the Australian dollar fell to 1.6437 against the euro and 112.88 against the yen, from yesterday's closing quotes of 1.6392 and 113.32, respectively. If the aussie extends its downtrend, it is likely to find support around 1.65 against the euro and 111.00 against the yen.
Against the U.S. and the Canadian dollars, the aussie edged down to 0.7042 and 0.9870 from Monday's closing quotes of 0.7071 and 0.9895, respectively. The aussie may test support near 0.69 against the greenback and 0.97 against the loonie.
The NZ dollar fell to a 1-1/2-month low of 1.9975 against the euro and an 8-day low of 1.2167 against the Australian dollar, from yesterday's closing quotes of 1.9894 and 1.2136, respectively. If the kiwi extends its downtrend, it is likely to find support around 2.02 against the euro and 1.23 against the aussie.
Against the U.S. dollar and the yen, the kiwi dropped to 5-day lows of 0.5795 and 92.90 from Monday's closing quotes of 0.5827 and 93.37, respectively. The kiwi may test support near 0.56 against the greenback and 92.00 against the yen.
The Canadian dollar fell to a 5-day low of 1.4019 against the U.S. dollar, from yesterday's closing value of 1.3991. Th enext possible downside target of the loonie is seen around the 1.40 region.
Against the yen and the euro, the loonie edged down to 114.30 and 1.6232 from Monday's closing quotes of 114.53 and 1.6219, respectively. If the loonie extends its downtrend, it is likely to find support around 113.00 against the yen and against the euro.
Looking ahead, German ZEW economic sentiment index for June and Eurozone labour cost index and wage growth data for the first quarter are slated for release in the European session.
In the New York session, U.S. ADP employment data, building permits, housing starts, import and export prices, all data for May and U.S. New York Fed services activity index for June are set to be released.
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