WSJ Dollar Index Falls 0.13% to 97.28

The WSJ Dollar Index fell 0.13% to 97.28 on July 9, ending a three-day winning streak and posting its largest one-day decline since July 2.

The move came as traders weighed renewed U.S.-Iran tensions, swings in oil prices and shifting expectations for U.S. and European interest rates. The index was still up 1.42% for the year, but remained 7.48% below its 2022 high.

Why the dollar eased

Markets have been sensitive to signs that Middle East risk could feed into energy prices and broader inflation expectations. That backdrop has kept foreign exchange traders focused on whether central banks may need to stay tighter for longer.

The dollar's pullback followed a run higher over the previous three sessions. Barron's separately reported that the broader dollar gauge it tracks was steady, underscoring that the session's FX tone was mixed rather than uniformly directional.

Cross-currency reaction

The euro edged higher as traders continued to speculate that the European Central Bank may tighten further. Sterling also strengthened and briefly reached a one-year high against the euro, supported by expectations that the Bank of England may raise rates further and by higher oil prices.

In Asia, currencies were described as broadly stable but vulnerable to further oil-driven volatility. The Thai baht and Australian dollar were singled out as especially exposed to moves in energy prices and U.S. Treasury yields.

What to watch next

The next questions for currency traders are whether the dollar's decline marks a one-day pause or the start of a broader move, and whether U.S.-Iran tensions ease or intensify again.

Upcoming U.S. data and Federal Reserve commentary will also matter. Any fresh repricing of Fed or ECB policy could extend the dollar's move quickly in either direction.