Dollar Strengthens, US-Iran Tensions Boost Safe-Haven Demand
The US dollar strengthened in European markets on Monday (April 20th) amid renewed US-Iran tensions, raising doubts about whether the temporary ceasefire will be extended. The dollar index (DXY) rose 0.2% to 98.27 at 8:33 a.m. ET, although slightly off its previously hit one-week high.
The DXY's movement occurred as the euro remained relatively stable at $1.1763 and the pound sterling remained virtually unchanged at $1.3512. The Australian dollar, often used by markets as a proxy for risk appetite, weakened against the US dollar.
ING assessed the dollar as "bid" again after being pressured on Friday when news emerged that the Strait of Hormuz was "fully open." However, the renewed toughening of the tone between the US and Iran, coupled with the seizure of an Iranian cargo ship by the US Navy, prompted the market to increase its exposure to the dollar.
From a fundamental perspective, geopolitical uncertainty is increasing demand for liquid and defensive assets, while strengthening the transmission channel through rising energy prices. With oil prices rebounding after last week's sharp decline, market participants are reassessing inflation risks and their implications for the monetary policy outlook.
The market's next focus will be on the continuation of the two-week ceasefire, which will end this week, the agenda for peace talks reportedly scheduled to take place in Pakistan, and Iran's rejection of a second round of negotiations, citing excessive US demands and Washington's changing position. The dollar's near-term direction will be sensitive to Hormuz-related headlines, oil movements, and changes in global risk appetite. (gn)
Source: Newsmaker.id
