Dollar Index Strengthens: Iran Sets Direction Today
The US Dollar Index (DXY) strengthened and held above the psychological 100.00 level, trading around 100.10 in the Asian session on Tuesday, as demand for safe-haven assets increased amid geopolitical threats in the Middle East. The dollar's strength came as market participants weighed developments in negotiations and escalating risk appetite ahead of a deadline set by US President Donald Trump.
Trump on Monday deemed the latest US ceasefire proposal with Iran "not good enough" and escalated the threat of attacks if its terms were not met. He threatened to target Iranian power plants and bridges if the Strait of Hormuz was not reopened, with a deadline of 8:00 PM ET (Wednesday 00:00 GMT/07:00 WIB).
From the Iranian side, a spokesman for the Joint Supreme Military Command (JSC) stated that Trump would not forgive the US's "disgrace and humiliation" in the region. This mutually reinforcing narrative keeps risk perceptions high and pushes the dollar higher against major currencies in the short term, as investors tend to reduce risk exposure when it increases.
The rising oil prices that sparked the conflict are also seen as complicating the Federal Reserve's interest rate path. Cleveland Fed President Beth Hammack stated that a rate hike could be an option if inflation remains persistently high, causing the market to reassess the risk of tighter, or at least longer, policy.
On the data front, US service activity indicators showed signs of cooling. The Institute for Supply Management (ISM) reported that the Services PMI fell to 54.0 in March from 56.1 in February, below expectations of 55.0, indicating weakening momentum in the sector, although still in the expansionary zone.
Furthermore, attention is drawn to the release of US Durable Goods Orders and ADP employment data on Tuesday. The combination of geopolitical developments, energy price dynamics, and economic data will determine whether the dollar's strength continues through the safe-haven channel and interest rate expectations, or begins to subside if the risk of escalation diminishes and data points to a more pronounced slowdown.
5 Key Points:
- The DXY strengthened to around 100.10 and held above 100.00 as safe-haven demand increased.
- Trump increased pressure on Iran and set a Tuesday deadline of 8:00 PM ET regarding Hormuz and the deal.
- Iran asserted that Trump's threats did not change its stance, keeping geopolitical tensions high.
- Rising oil prices are seen as complicating the Fed's path; Cleveland Fed officials left open the possibility of a rate hike if inflation persists.
- The ISM Services PMI fell to 54.0 (below expectations of 55.0), indicating accelerating momentum in the US services sector. (asd)
Source: Newsmaker.id
