The dollar moved higher on Tuesday, while major currencies traded flat, as persisting fears about Middle Eastern tensions countered investors’ hopes for forthcoming US interest rate reduction.

Geopolitical risks limited early currency movements, but fears of an expanding confrontation following Israel and Hezbollah’s significant missile exchange over the weekend faded.

The yen was last down 0.2% at 144.82 per dollar, giving up some of its safe haven gains from the previous session, when it reached a three-week high of 143.45.

The euro and pound fell slightly to $1.1161 and $1.3182, respectively, but both remained close to their recent multi-month highs.

The Canadian currency was barely changed at 1.3487 per US dollar, after reaching a five-month high overnight as oil prices soared.

Still, major currencies were around milestone highs, with the dollar approaching its lowest level in nearly a year, aided by the prospect of a US rate decrease in September, which Federal Reserve Chair Jerome Powell hinted at in his Jackson Hole speech on Friday.

Mary Daly, President of the San Francisco Fed, also stated on Monday that borrowing costs would likely be reduced by a quarter percentage point next month.

Against a basket of currencies, the dollar was recently 0.05% higher at 100.90, close to a 13-month low of 100.53 set in the previous session.

The Fed’s aggressive rate-hike cycle and anticipation of how much higher U.S. rates could increase had been a major driver of the dollar’s strength over the last two years.

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