Dollar Swings Sharply as Risk Sentiment Continues to Change
The US dollar swung sharply on Tuesday (March 24th), strengthening against major currencies after intraday swings as market participants continued to monitor headlines surrounding the Iran war. The Bloomberg Dollar Spot Index rose around 0.2%, while the 10-year US Treasury yield rose 2 bps to 4.36%, confirming the USD's continued support from interest rate movements.
Early in the session, concerns about a broader conflict boosted safe-haven demand for the dollar. However, speculation about possible talks between the US and Iran temporarily dampened the dollar's gains, leading it to a flat day. As fighting between Iran and the US-Israel alliance continued without signs of abating, the dollar regained strength, even though oil prices were no longer near their daily peaks.
In addition to geopolitical factors, the dollar also received support from a weaker euro following the release of PMI data from the eurozone's largest economies. EUR/USD fell around 0.3% to 1.1576, after eurozone private sector activity recorded its slowest growth since May of last year. The market believes the Iran war has the potential to trigger inflation and threaten the still-fragile economic recovery.
Meanwhile, EUR/GBP edged up to 0.8658 ahead of UK Chancellor of the Exchequer Rachel Reeves' statement in parliament on Tuesday. Meanwhile, NZD/USD fell 0.7% to 0.5816, after New Zealand Reserve Bank Governor Anna Breman signaled that policymakers would not rush to raise interest rates in response to the Middle East conflict. She emphasized that the central bank was prepared to "wait out" a spike in fuel costs as long as the disruption did not trigger broader inflationary pressures.
In Asia, USD/JPY edged up by around 0.2% to 158.68, in line with the dollar's general moderate strength and the yen's sensitivity to energy prices and interest rate differentials.
Source: Newsmaker.id
