Dollar Halts Rally, Euro Steady as Markets Speculate on Short-Term War
The US dollar stalled sharply on Thursday (March 5), giving way to a weakening euro, as investors clung to the fragile assumption that the war in the Middle East might not last as long as initially expected. Sentiment quickly improved after reports emerged that Iranian intelligence had signaled an openness to talks with the CIA to end the war, although Tehran later denied this, underscoring how sensitive markets are to any signs of de-escalation.
The dollar index weakened from a more than three-month high hit earlier this week and stood at 98.78 against a basket of currencies. The euro edged up to $1.1636, after briefly falling to a more than three-month low on Tuesday, while the pound sterling held steady at $1.3366. CBA currency strategist Carol Kong said the market was taking a “relatively calm” stance despite the war’s duration and impact, with additional support from solid US economic data: service sector activity surged to a more than 3.5-year high in February.
Despite the dollar's weakness, the greenback still posted gains of more than 1% this week and remains one of the "winners" amidst the volatility that has driven up stocks, bonds, and sometimes even precious metals. The surge in energy prices due to the conflict has fueled fears of a resurgence in inflation, leading markets to treat the Middle East war as an inflationary risk. Consequently, expectations for interest rate cuts from the Fed and the Bank of England have begun to diminish, while European money markets are pricing in a roughly 40% chance the ECB will raise rates before the end of the year.
In Asia, the yen strengthened 0.2% to 156.78 per dollar as the US dollar weakened. The Australian dollar rose 0.14% to $0.7085, extending the previous session's gains, supported by an unusual safe-haven bid, as Australia is seen as benefiting from domestic energy discussions amid rising oil prices. The offshore yuan strengthened slightly to 6.8860, while China set its 2026 economic growth target at 4.5%–5%, slightly below last year's 5% target. In the crypto market, Bitcoin and Ether fell about 1% each after strong overnight rallies when risk appetite improved. (asd)
Source: Newsmaker.id
