Dollar Rises, Hormuz a Trigger
The US dollar index (DXY) edged higher and remained above 98.00, trading around 98.30 during Monday's Asian session. This limited gain occurred as the market responded to the renewed tensions between the United States and Iran.
The trigger came from diplomatic developments, after Iran stated it did not plan to participate in the second round of negotiations with the US. At the same time, President Donald Trump ordered US negotiators to head to Pakistan ahead of the expiration of the Middle East ceasefire on April 22, making the prospects for a peace deal fragile.
From Iran's perspective, Foreign Ministry spokesman Esmail Baghaei considered the US blockade of Iran's ports and coastline an act of aggression that violates the ceasefire. This uncertainty prompted some investors to shift positions to safe-haven assets and currencies, including the US dollar.
Nick Twidale, chief market strategist at ATFX Global in Sydney, believes the market's focus remains on the Strait of Hormuz, and the chances of the US and Iran returning to the negotiating table before the ceasefire expires are now looking increasingly remote. The perception of heightened geopolitical risk is a supporting factor for the dollar in the short term.
Market attention will next turn to the release of US Retail Sales for March on Tuesday. Consensus estimates retail sales rose 1.3% (MoM), from 0.6% in February; a weaker-than-expected result could potentially curb the DXY's near-term gains.
5 key points:
- The DXY strengthened slightly in the Asian session on Monday, trading around 98.30 and holding above 98.00.
- US-Iran tensions escalated after Iran refused to participate in the second round of negotiations with the US.
- Iran views the US blockade of its ports and coastline as a violation of the ceasefire.
- Geopolitical risks and uncertainty surrounding Hormuz are driving interest in the dollar as a safe haven.
- Markets await US Retail Sales on Tuesday; The projection is 1.3% MoM, and a weaker figure could weigh on the DXY. (asd)
Source: Newsmaker.id
