Dollar Steady, Markets Eye Middle East Risks and Trump-Xi Agenda
The US dollar held steady on Monday (May 11) after President Donald Trump rejected Iran's response to a US peace proposal, pushing up oil prices and reviving concerns that the Middle East conflict could escalate.
The dollar index (DXY), which measures the greenback against six major currencies, was virtually unchanged at 97.995.
The rise in oil has been a key transmission channel to the FX market, reinforcing inflation risks and adding to policy uncertainty. Brent rose about 3.6% to US$104.94 per barrel, while market participants believe this escalation remains limited by the belief that the conflict can eventually ease, particularly given China's role and Trump's meeting with President Xi Jinping this week, which is expected to discuss Iran, along with Taiwan, artificial intelligence, nuclear weapons, and critical minerals.
On the US macro front, focus shifts to this week's April inflation release after Friday's jobs data showed non-farm payrolls rose by a stronger-than-expected 115,000 in April, reinforcing expectations the Fed will keep interest rates unchanged for some time. The Fed held rates on hold last month, but the decision sparked the deepest divergence of views in decades, with three officials disagreeing on the future signal for a rate cut. Support for the dollar was seen as relatively solid amid a combination of resilient US data and geopolitical tensions.
Other currency movements were mixed: the Chinese yuan briefly touched its strongest level in more than three years before the offshore yuan stabilized at 6.7928 per dollar, supported by producer prices that beat expectations to a 45-month high and reported strong exports on AI-related demand. The euro fell 0.1% to US$1.1774, the yen weakened 0.3% to 157.11 per dollar, and the pound fell 0.23% to US$1.36, as the UK market monitored domestic political dynamics following local elections and their implications for policy direction.
Source: Newsmaker.id
