US Dollar strengthens as confidence over de-escalation in Iran rises

The US dollar maintained its gains at the beginning of Asian trading on Thursday. As investors sought clarification on whether a de-escalation in the US-Israeli dispute with Iran was imminent, and reduced expectations that the Federal Reserve’s next step may be a rise.

The US dollar was unchanged at 159.41 yen against the yen, staying close to its highest levels since 2024. The New Zealand dollar remained stable at $0.5806, while the Australian dollar fell 0.1% to $0.6943.

Iran’s foreign minister stated on Wednesday that while the nation is considering a US request to put an end to the Gulf War, it has no plans to hold negotiations to resolve the escalating Middle East conflict.

Also Read: US stocks rise, oil falls as truce prospects weighed

The US dollar index, which gauges the strength of the US dollar relative to a basket of six currencies, increased 0.5% to 99.641, its largest one-day advance in a week, as geopolitical uncertainty remained high.

In a research study, Westpac analysts stated, “Markets remain decisively headline driven, with a square focus on weighing up whether recent news marks a genuine de-escalation attempt or a precursor to a new kinetic equilibrium.”

Following the surge in oil costs brought on by the closure of the Strait of Hormuz, traders are beginning to doubt earlier inflation projections and are becoming more certain that the Federal Reserve will maintain policy settings for the duration of the year. According to the CME Group’s FedWatch tool, Fed funds futures are pricing an expected 70.6% probability that the US central bank will stay on hold at its meeting in December, up from a 60.2% possibility a day earlier.

In offshore trade, the US dollar was flat at 6.9026 yuan against the Chinese yuan after US President Donald Trump said that he would meet Chinese President Xi Jinping on May 14–15 on his first visit to China in eight years, which was postponed due to the war with Iran.

Following remarks made by European Central Bank President Christine Lagarde on Wednesday that hinted at rising interest rates in the euro zone if the Middle East conflict causes inflation in the euro zone to rise for a while, the euro was flat at $1.1560, stabilising after two days of fall.

The British pound was stable at $1.3365, trying to avoid its third straight day of declines after data on Wednesday revealed that consumer price inflation in February remained over goal at 3.0%, unchanged from January’s figure.

In terms of cryptocurrency, ether increased by 0.2% to $2,170.88 while bitcoin increased by 0.4% to $71,247.25.