US dollar softens as Mideast conflict, central bank meetings in focus
The dollar was softer in choppy trading on Monday, as investors monitored the fighting between Israel and Iran for signs that it could escalate into a broader regional conflict and braced for a week packed with central bank meetings.
As both Iran and Israel showed no signs of backing off from their attacks, market participants mulled the prospect that Tehran might seek to choke off the Strait of Hormuz - the world's most important gateway for oil shipping. This could raise broader economic risks from disruptions in the energy-rich Middle East.
The dollar, which until recently had always been the ultimate safe haven in times of geopolitical or financial turmoil, slipped 0.3% to 143.73 Japanese yen after rising nearly 0.4% earlier on Monday. The euro rose 0.5% to $1.1604.
The U.S. currency was also softer against the Swiss franc at 0.8104 franc, while an index that measures the dollar against six peers declined 0.5% to 97.74.
Currencies that are positively correlated to risk such as the Australian and the New Zealand dollars were 0.9% and 1.2% higher, respectively, while the oil-exposed Norwegian crown was up just 0.3%, after hitting its highest since early 2023 earlier in the day.
On Friday, investors had bought back into the dollar, which has lost more than 9% in value against a basket of six other currencies this year as U.S. President Donald Trump's move to reshape the global trade order heightened economic uncertainty.
But analysts were less convinced that the trend could continue until there was more clarity on the tariff front.
The U.S. Federal Reserve gives its latest policy decision on Wednesday, with the Israel-Iran conflict adding complexity for policymakers.
Investors remain nervous over Trump's deadline on trade deals due in about three weeks, while agreements with major trade partners, including the European Union and Japan, are yet to be signed.
They will look for progress in any bilateral meetings with the U.S. on the sidelines of a Group of Seven leaders' meeting in Canada.
Source : Reuters
