Dollar Gains Moderately, Focus Shifts to RBA and Potential Japanese Intervention
The US dollar strengthened against the euro on Monday (May 4th) as Middle East conflict kept sentiment fragile and supported demand for safe-haven assets. The dollar index rose 0.2% to 98.404, supported by the lack of a clear solution to the conflict that has fueled volatility since the US attack on Iran in early March.
The market was briefly confronted by a report by Iran's Fars news agency that two missiles struck a US warship near Jask in the Gulf of Oman, after the vessel ignored Iranian warnings regarding the Strait of Hormuz. US Central Command denied the report. The US military stated that two guided-missile destroyers entered the Gulf to break the Iranian blockade and that two US merchant ships had passed through the Strait of Hormuz.
The euro weakened 0.2% to US$1.1694, with attention also turning to US-Europe trade issues after Trump announced he would raise tariffs on EU cars and trucks to 25%. The German government said Berlin was coordinating with the European Commission amid talks with Washington, while Chancellor Friedrich Merz sought to defuse perceptions of a rift with Trump after the US announced plans to reduce troops from Germany.
In Asia, the yen briefly strengthened as much as 0.75% to 155.69 per dollar before trading within a limited range, sending USD/JPY down 0.06%. This movement rekindled speculation of intervention, after Reuters sources reported Japan was buying yen for the first time in two years. Currency market data on Friday indicated intervention spending could reach 5.48 trillion yen (approximately US$35 billion).
The British pound fell 0.3% to US$1.35365, while the Australian dollar weakened 0.4% to US$0.7174 ahead of the Reserve Bank of Australia's decision on Tuesday. Most analysts expect a cash rate increase to 4.35%, so the direction of the AUD and the dollar in general will remain sensitive to the combination of Hormuz headlines, potential Japanese authorities' actions, and the RBA meeting outcome. (Arl)*
Source: Newsmaker.id
