SINGAPORE (Reuters) - The dollar found support at the start of Asian trading on Tuesday after U.S. President Donald Trump said he had paused a planned attack against Iran to allow negotiations and bond markets stabilised after a two-day selloff.
The U.S. dollar index , which measures the greenback's strength against a basket of six currencies, held steady at 99.026, attracting bids after easing fears of an escalation in the war pushed the gauge 0.3% lower on Monday, snapping a five-day winning streak.
"Sentiment stabilised after reports that the U.S. President had called off a planned strike on Iran following appeals from Persian Gulf leaders," Westpac analysts wrote in a research note.
The yield on the U.S. 10-year Treasury bond was down 3 basis points at 4.591%, retreating after hitting its highest level in a year as fears a lasting jump in inflation eased. Brent crude futures slumped 2.4% to $109.43 per barrel.
The dollar had gained strength during the past week as a safe haven from an escalation of the war in the Middle East and a selloff gripping global bond markets, as investors repriced the risk that central banks would have to take action to contain inflation with the Strait of Hormuz remaining closed and energy markets disrupted.
Fed funds futures are pricing an implied 36.2% probability of a 25-basis-point hike at the U.S. central bank's two-day meeting on December 9, compared to a 0.5% chance a month ago, according to the CME Group's FedWatch tool.
Against the yen , the U.S. dollar was flat at 158.895 yen after government data showed on Tuesday that Japan's economy grew by an annualised 2.1% in the first quarter, compared with the median market forecast for a 1.7% gain.
Japanese Finance Minister Satsuki Katayama told reporters on Monday that Japan stands ready to act against excessive foreign exchange volatility at any time, while ensuring that any intervention to support the yen and sell dollars is conducted in a way that avoids pushing up U.S. Treasury yields.
Investors have been on watch for further signs of intervention to support the yen, which is little stronger than it was before Japanese officials last month began their first foray into the market in almost two years.
Tokyo may have spent nearly 10 trillion yen ($63 billion) since launching its latest round of yen-buying on April 30, central bank data indicates.
The euro was flat at $1.1650, while the British pound was down 0.1% at $1.3427.
The Australian dollar was 0.1% lower at $0.7164, while its kiwi counterpart slid 0.1% to $0.5868.
Against the Chinese yuan , the U.S. dollar held steady at 6.798 yuan in offshore trade.
Bitcoin edged up 0.2% to $77,005.69, while ether was up 0.8% at $2,131.91.