The euro held firm against a mostly higher dollar on Monday, buoyed by a favorable shift in yield spreads as Treasury yields and oil prices retreated while European equity indexes gained. U.S. President Donald Trump said the U.S. is holding "good talks" with Iran and suggested a deal remains possible, adding that he has "plenty of time" to address the issue. Trump also called on the Fed to lower interest rates, saying the U.S. should have the lowest interest rate in the world. Israeli Prime Minister Benjamin Netanyahu is set to meet with Trump on Tuesday.
A five-year auction showed soft demand with indirect bidders, a proxy for overseas demand, below the average of the six prior auctions.
The dollar index rose for a third day in modest turnover, with option risk reversals the most bullish since June.
The offshore yuan touched a five-week high against the dollar as yields and tech shares came under pressure. EUR/USD rose slightly though reversed most of its gains on broad dollar buying and stable U.S. yields, with bearish monthly signals suggesting rallies may be capped.
Sizeable euro options expire this week, including more than EUR20 billion concentrated in the 1.1350-1.1400 area and a further EUR13 billion at strikes between 1.1450 and 1.1500. EUR/CHF rose for a sixth day after the Swiss National Bank declined to comment on a media report that it expects to keep interest rates at zero through end-2027. Sterling slipped below 1.33 as a tech-led risk selloff and elevated UK yields offset support from lower oil prices, leaving GBP/USD vulnerable to further downside. AUD/USD retreated from above 0.7000 on firmer U.S. yields and broad dollar demand, but its hold above key moving averages keeps the broader outlook constructive as metals and CNH firm. USD/JPY was supported by haven dollar demand despite lower yields and oil prices, though fading momentum suggests pre-Fed/BOJ gains toward 164.00 could prove difficult.
Treasury yields were down 1 to 4 basis points with the 2s-10s curve falling about 2 basis points to +32.2bp.
The S&P 500 slipped 0.17% as tech and energy shares retreated.
WTI oil slid over 7%, extending its slide after Trump's comments on Iran.
Gold rose 0.56% while copper gained 0.50%
Heading toward the close: EUR/USD +0.01%, USD/JPY -0.07%, GBP/USD -0.25%, AUD/USD +0.03%, DXY +0.06%, EUR/JPY -0.04%, GBP/JPY -0.27%, AUD/JPY +0.07%.(Editing by Burton Frierson Robert Fullem is a Reuters market analyst. The views expressed are his own)
