Dollar on edge as shaky US-Iran ceasefire fuels uncertainty

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The Dollar stayed under pressure on Thursday following widespread declines, as investors nervously evaluated whether the fragile ceasefire between the United States and Iran would last.

The agreement already seemed at risk, with Israel continuing its separate conflict against the Iran-backed group Hezbollah in Lebanon. At the same time, Tehran accused both Israel and the US of breaching the deal, arguing that continuing peace negotiations would be “unreasonable.”

Meanwhile, the Strait of Hormuz remained closed to ships lacking permits, and shipping companies held off on resuming operations, pushing oil prices higher.

The Dollar index, which tracks the US currency against a group of peers, held steady at 99.07. The Euro slipped slightly by 0.01% to $1.1661, while the British pound inched up 0.01% to $1.3393, Reuters reports.

The Yen gave back part of its gains from the previous day after news of the ceasefire in the Middle East, falling 0.15% against the Dollar to 158.81 per Dollar.

The overnight indexed swap (OIS) market is currently assigning a 55% probability to an interest rate increase at the Bank of Japan’s meeting later this month.

Japan’s consumer confidence fell in March for the first time in three months, according to a government survey released on Thursday, adding to recent signs that the Middle East conflict could weigh on the economy and complicate the Bank of Japan’s decision on raising interest rates. The Yen showed little reaction to the data.

Speaking in parliament, BOJ Governor Kazuo Ueda said real interest rates remain clearly negative, keeping financial conditions accommodative.

Among major currencies, the greenback has been a key beneficiary of the conflict, partly because the United States is a net energy exporter and is therefore less vulnerable to the economic impact that oil-importing countries such as Japan and many European nations may face.

The five-week conflict has unsettled investors, causing the most significant disruption to global oil and gas supplies ever recorded.

Analysts say the fragile truce has left Iran with increased influence over shipping in the crucial strait compared to before the conflict, after Donald Trump stepped back from earlier threats to target Iran’s civilian infrastructure.

Moreover, the United States is due to release February data on personal spending and the PCE deflator on Thursday. According to Akihiko Yokoo, a senior analyst at Mitsubishi UFJ Bank, stronger-than-expected US figures could help lift the Dollar.

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