Safe Havens Support Dollar, Markets Wary of Inflation Data
The US dollar strengthened slightly in trading on Monday (May 11) amid increased demand for safe haven assets following the diplomatic deadlock between Washington and Tehran. Market participants were also cautious ahead of the release of key US inflation data this week, which could potentially reflect the impact of the surge in oil prices.
At 3:43 p.m. New York time (19:43 GMT), the US Dollar Index (DXY), which measures the greenback's strength against six major currencies, rose 0.1% to 97.96.
Tensions escalated after Iranian state media reported that Tehran had delivered a formal response to a US peace proposal to end the conflict that has lasted more than two months. In the response, Iran demanded an end to hostilities on all fronts, recognition of sovereignty over the Strait of Hormuz, and compensation from the US for war damages.
President Donald Trump quickly rejected the response, calling it "totally unacceptable." He also stated that Iran did not include a commitment to halt nuclear enrichment in the latest proposal, a key condition of Washington. Trump even called the ongoing ceasefire "unbelievably weak" and on "massive life support."
Beyond the nuclear issue, control of the Strait of Hormuz remains crucial. This vital waterway, through which approximately one-fifth of the world's oil and gas supplies pass, remains effectively closed due to a dual blockade by the US and Iran. Trump said he is considering reactivating "Project Freedom" to help commercial vessels navigate the strait.
Currency markets are also now focused on the release of the April Consumer Price Index (CPI) and Producer Price Index (PPI). Investors will be watching to see how the surge in oil prices due to the conflict has fueled further inflationary pressures. A significant spike in these data could potentially strengthen expectations of tighter interest rate policy, which typically supports a stronger dollar.
Elsewhere in the currency market, the Chinese yuan strengthened slightly, with the USD/CNY pair falling 0.1% to 6.7948 after data showed that Chinese consumer and producer inflation rose above expectations. Meanwhile, the pound sterling weakened 0.1% to US$1.3620 following domestic political dynamics, and the euro fell 0.1% to US$1.1776.
Overall, the dollar maintained modest gains amid a combination of geopolitical risks and uncertainty over the direction of inflation, with the market bracing for key data catalysts in the coming days. (Arl)*
Source: Newsmaker.id
