Dollar Holds Near Recent High Amid Middle East Tensions
The U.S. dollar edged higher on Thursday, hovering close to a one-and-a-half-week high as escalating tensions between the United States and Iran supported safe-haven demand and pushed oil prices back above $100 per barrel.
The ongoing standoff has weighed on overall market sentiment, with investors remaining cautious amid limited progress in diplomatic negotiations.
Hormuz Escalation Fuels Energy Concerns
Tensions intensified after Iran seized two vessels in the Strait of Hormuz, a key route for global energy supplies. The move came shortly after U.S. President Donald Trump extended a ceasefire indefinitely, despite no clear path toward renewed peace talks.
Disagreements over blockades, nuclear issues, and control of the strait continue to keep the waterway effectively restricted, triggering an energy shock with global economic implications.
Markets Shift to Cautious Mode
According to Philip Wee, markets are increasingly reluctant to take strong directional positions following earlier optimism around a potential de-escalation.
Instead, trading activity has shifted toward a more cautious, wait-and-see approach, with volatility settling into a consolidation phase.
Euro, Pound and Commodity Currencies Weaken
The euro slipped to $1.1699, touching its lowest level since April 13 and heading for a weekly decline of around 0.5%, marking its first drop in four weeks. The British pound also edged lower, falling 0.1% to $1.3484.
Commodity-linked currencies came under pressure, with the Australian dollar down 0.2% to $0.7147 and the New Zealand dollar declining 0.3% to $0.5886.
Yen Remains Near Key Intervention Level
The Japanese yen traded around 159.56 per dollar, remaining close to the 160 level, which is widely viewed as a potential trigger point for intervention by authorities.
The Bank of Japan is expected to hold interest rates steady at its upcoming meeting, while signaling the possibility of rate hikes in the coming months.
Dollar Index Near Multi-Day High
The U.S. dollar index, which tracks the currency against a basket of major peers, rose slightly to 98.676, near its highest level since mid-April. The index is on course for a modest weekly gain of around 0.5%, following two consecutive weeks of losses.
Inflation and Rate Expectations in Focus
The prolonged Middle East conflict has driven a sharp rise in fuel prices, weakening consumer confidence and reducing expectations for interest rate cuts this year.
A recent survey suggests that the Federal Reserve may delay rate cuts for at least six months, as energy-driven inflation continues to pose risks.
Key Economic Data Ahead
Investors are now looking ahead to upcoming U.S. economic releases, including weekly jobless claims and purchasing managers’ index (PMI) data, for further insights into how rising energy costs are impacting the broader economy.
