Dollar Strengthens, US-Iran Tensions Boost Dollar Demand
The US dollar index (DXY) rose on Monday, returning above the 98.00 level after bouncing from a low of 97.70 on Friday. While still within the lower trading range of recent weeks, this strengthening reflects increased defensive demand as verbal tensions between the US and Iran re-escalate and dampen risk appetite.
The situation in the Middle East worsened after US President Donald Trump announced a plan to free ships stranded in Iran, with the operation reportedly set to begin on Monday. Trump has not elaborated on the technical details of the complex operation, while Tehran has warned that any violation of Iranian territorial waters by the US military will be considered a ceasefire violation and will be met with "full force."
The plan also boosted oil prices. WTI traded just below US$100 per barrel, further limiting market risk appetite and pressuring several major sentiment-sensitive currencies, including the euro and yen. The rise in oil also reinforced concerns about energy inflation, potentially narrowing the scope for monetary policy easing.
On the data front, the market awaits the release of US Factory Orders for March on Monday. However, this week's main focus is on April's employment data, particularly Friday's Nonfarm Payrolls, which is closely watched after last week's Federal Reserve meeting took a more hawkish tone, including the emergence of three dissenters who rejected the inclusion of an "easing bias" in the policy statement.
Going forward, the DXY's direction will be heavily influenced by two main channels: geopolitical escalations that shift demand for safe havens, and US employment data, which will shape Fed interest rate expectations and yield movements. (yds)
Source: Newsmaker.id
