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

Dollar Struggles Amid Oil Price Slump and Anticipated Australia Rate Hike

Market Movements and Central Bank Decisions

By Jiaxing Li

Dollar and Oil Price Fluctuations

HONG KONG, Nov 3 (Reuters) - 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.

Impact on Inflation and Treasury Yields

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.

Currency Index and Risk Sentiment

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.

Expert Commentary

"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."

Major Currencies Overview

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.

Central Bank Meetings and Rate Hikes

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.

Reserve Bank of Australia Expectations

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.

Bank of England and Sterling Performance

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.

(Reporting by Jiaxing Li; Editing by Jamie Freed)