Why Did the Dollar Suddenly Strengthen Again?
The US dollar index strengthened to around 98 on Monday (May 11), recovering some of last week's losses, as uncertainty surrounding US-Iran relations boosted demand for safe-haven assets. Markets considered the chances of a diplomatic solution still difficult amid the conflict that has been going on for about 10 weeks.
US President Donald Trump rejected Iran's latest response to a peace proposal, calling it "totally unacceptable." Reports circulated that Iran offered to transfer some of its stockpile of highly enriched uranium to a third country, but refused to dismantle its nuclear infrastructure, bringing negotiations back to a deadlock.
On the data front, the US employment report on Friday showed nonfarm payrolls rose by 115,000 in April, higher than expectations of 62,000. This data reinforces the market view that the Federal Reserve is likely to keep interest rates unchanged this year.
The next focus will be on the release of US inflation for April, which will provide clues as to whether rising oil prices are beginning to exert pressure on broader prices. The direction of inflation is important because it will influence expectations about the Fed's policy and determine whether the support for the dollar from the safe-haven and interest rate perspectives will persist.
5 key points:
- The dollar index rose to around 98 due to safe-haven demand.
- US-Iran uncertainty increased after Trump rejected Iran's response.
- Iran reportedly offered to transfer some uranium to a third country, but refused to dismantle its nuclear infrastructure.
- April's NFP of 115,000 was above expectations of 62,000, reinforcing expectations that the Fed would hold interest rates.
- The market is awaiting April's US inflation data to gauge the impact of rising oil prices on price pressures and the direction of the dollar. (asd)
Source: Newsmaker.id
