Dollar Weakens, Hopes of Middle East Negotiations Pressure Safe Havens
The US dollar weakened on Friday (April 17th) and headed for a second straight weekly decline, as its safe haven appeal faded following hopes for progress in Middle East peace negotiations. At 9:06 a.m. ET, the dollar index (DXY) was down 0.53% and had erased most of the gains made during the war.
From March to early April, the dollar strengthened as investors sought safe havens amid the Iran war and the effective closure of the Strait of Hormuz. The dollar was also supported by the perception that the US, as a major energy exporter, was relatively better protected from oil shocks than many importing countries. However, more optimistic rhetoric regarding the progress of talks has begun to trigger a reversal, putting pressure on the greenback again.
Axios reported that the US and Iran are negotiating a three-page plan to end the war, which is approaching its 50th day, with discussions centering on the option of releasing $20 billion in frozen Iranian funds in exchange for handing over its stockpile of enriched uranium. President Donald Trump also said US and Iranian negotiators may meet later this week for a second round, while the Israeli-Lebanese ceasefire agreement is seen as easing a stumbling block in Washington-Tehran talks.
In major markets, the euro strengthened 0.56% to US$1.1848, while the pound sterling remained relatively stable at US$1.3527 despite some pressure from domestic political issues in the UK. The Australian dollar held near a nearly four-year high as a proxy for risk sentiment, while the dollar remained relatively flat against the yen following comments by Bank of Japan Governor Kazuo Ueda that signaled no interest rate hike in April.
Markets continue to monitor post-war inflation risks triggered by the historic surge in oil prices since late February, as well as how central banks respond to price pressures. The next focus will be headlines from the US-Iran talks, developments in the implementation of the Israeli-Lebanese ceasefire, the direction of energy prices, and changes in global interest rate expectations that could further shift the dollar's position. (Arl)*
Source: Newsmaker.id
