1335 ET – Treasury yields and the dollar jumped after President Trump posted on Truth Social that Iran had downed a U.S. helicopter and, even though two pilots were safe, retaliation was a “necessity.” The jump, however, was fleeting and both yields and the WSJ Dollar Index resumed their downward trend. The 10-year yield rose to 4.55% on Trump’s comments before falling back to 4.53%. The WSJ Dollar Index reached 96.62 and receded to 96.48. (paulo.trevisani@wsj.com; @ptrevisani)

Rising U.S. Debt Leaves Dollar’s Valuation on Shaky Ground

U.S. Dollar Weakens

1030 GMT – U.S. Treasury yields are little changed in directionless trade, while the dollar declines as easing tensions in the Middle East reduced demand for safe-haven assets, Exness’ Wael Makarem says in a note. In addition, U.S. President Trump suggested that a potential agreement with Iran could be reached within days, boosting hopes that tensions may continue to subside, the financial market strategist lead says. “At the same time, the dollar continues to find support from monetary policy expectations,” he says. Following Friday’s stronger-than-expected non-farm payrolls report, the Federal Reserve is increasingly anticipated to raise its interest rates later this year, Makarem says. The 10-year Treasury yield rises 0.6 basis points to 4.555%, according to Tradeweb. The DXY dollar index falls 0.25% to 99.798. (emese.bartha@wsj.com)

Yen Likely to Remain Weak Even if BOJ Raises Rates

1203 GMT – An interest rate rise by the Bank of Japan on June 16 is unlikely to trigger a significant reversal of the yen’s weakness, MUFG Bank’s Lee Hardman says in a note. That is because such a move is nearly fully priced in, he says. The BOJ is also considering pausing the tapering of its government bond purchasing program from April 2027, according to media reports. “Overall, the latest developments have not changed our view that the yen is likely to remain weak in the near-term until the worst of the energy price shock begins to fade.” The dollar trades flat at 160.15 yen, near the five-week high of 160.39 reached Monday, LSEG data show. (renae.dyer@wsj.com)

Euro Faces Possible Falls After ECB Decision

1048 GMT – Elevated interest rate rise expectations by the European Central Bank ahead of Thursday’s policy decision leave the euro at risk of falling, Monex Europe analysts say in a note. A 25 basis-point rate rise is nearly fully priced and some market participants are positioned for as many as three increases this year, they say. Three rate rises this year look unlikely given the potential negative impact on growth, they say. Recognition of this by ECB President Christine Lagarde on Thursday would possibly weaken the euro, they say. The euro rises 0.3% to $1.1566. (renae.dyer@wsj.com)

U.S. Rate-Rise Bets Limit Dollar’s Fall

0951 GMT – Expectations for U.S. interest-rate rises are limiting the dollar’s decline in reaction to Israel and Iran pausing strikes, MUFG Bank’s Lee Hardman says in a note. The market is now pricing in multiple U.S. rate rises in the year ahead, moving yield spreads back in the dollar’s favor, he says. The next key test for rate expectations will be U.S. inflation data on Wednesday. While a pick-up in inflation is widely anticipated in coming months, it argues against the Federal Reserve keeping rates steady, he says. “Last week’s stronger nonfarm employment report has made it more likely that the Fed will at least drop their easing bias at the [June 17] meeting.” The DXY dollar index falls 0.2% to 99.813. (renae.dyer@wsj.com)

Euro Recovers Against Dollar on Improved Risk Sentiment

0716 GMT – Improved risk sentiment is allowing the euro to correct some of its recent losses against the dollar, ING’s Chris Turner says in a note. Sentiment recovers after Israel and Iran halted exchanges of fire on Monday. The euro’s gains could prove limited in the near term, however, with $1.1550-$1.1560 likely proving the top of the trading range, Turner says. “Thursday’s European Central Bank meeting could present some upside risks for euro-dollar, but we will need to get through U.S. inflation data [on Wednesday] first.” The euro rises 0.1% to $1.1541 after reaching a two-month low of $1.1499 Monday, LSEG data show. (renae.dyer@wsj.com)

Sterling Rises on Improved Risk Sentiment, Lower Oil Prices

0827 GMT – Sterling rises as risk sentiment recovers and oil prices ease after Israel and Iran halted strikes. With little on the economic calendar Tuesday and the Bank of England not meeting until June 18, sterling is likely to remain driven by risk appetite and energy prices in the near term, Monex Europe analysts say in a note. Sterling’s prospects are still unfavorable due to the impact of elevated energy prices on the U.K.’s terms of trade, a cooling labor market, softer recent inflation data and persistent political uncertainty around Prime Minister Keir Starmer’s future, they say. Sterling rises 0.2% to $1.3371 and the euro falls 0.2% to a two-week low of 0.8625 pounds, LSEG data show. (renae.dyer@wsj.com)

Swiss Franc Hit by Lagging Swiss Rates, Could Fall Further

0754 GMT – The Swiss franc’s recent falls likely reflect lagging Swiss market interest rates, ING’s Chris Turner says in a note. Market pricing on LSEG implies the Swiss National Bank will hold interest rates at 0% this year while other central banks are expected to raise rates. The European Central Bank is expected to raise rates on Thursday and could endorse pricing for further rate increases, Turner says. Moreover, data on June 30 could show a decent pick-up in interventions by the Swiss National Bank to weaken the franc in the first quarter, he says. The euro falls 0.1% to 0.9194 francs after reaching a five-week high of 0.9205 overnight, LSEG data show, and ING sees it potentially rising to 0.93. (renae.dyer@wsj.com)

Dollar Falls After Iran, Israel Halt Strikes

0631 GMT – The dollar falls as oil prices ease and demand for safe-haven assets moderates after Iran and Israel paused strikes on Monday. Iran and Israel said they would halt exchanges of fire but promised to retaliate if fighting starts again. President Trump had intervened in the conflict, saying Iran and Israel must stop shooting and declaring that both countries wanted an immediate ceasefire. “It felt as though for the time being at least, the weekend flare-up in hostilities had been stopped, and there was still a path for peace talks to continue,” Deutsche Bank analysts say in a note. The DXY dollar index falls 0.2% to 99.838. (renae.dyer@wsj.com)

Bitcoin Falls Slightly as It Struggles to Recover From Recent Selloff

0650 GMT – Bitcoin edges lower as it struggles to recover meaningfully after suffering heavy losses last week. The cryptocurrency reached a 20-month low on Friday, driven by geopolitical uncertainty, outflows in exchange-traded funds and an announcement by bitcoin-hoarding firm Strategy that it had sold bitcoin for the first time since 2022. Strategy announced renewed bitcoin purchases on Monday, although this had little impact. Bitcoin falls 0.2% to $63,366 after reaching as low as $59,125 Friday, LSEG data show. “With nothing important on today’s economic calendar, bitcoin traders are likely to focus on geopolitical headlines, ETF flow direction, the dollar, Treasury yields and whether the $63,000 recovery attracts follow-through buying,” Zaye Capital Markets analyst Naeem Aslam says in a note. (renae.dyer@wsj.com)