Dollar Weakens Slightly Ahead of Hormuz Deadline, Markets Remain Alert for Escalation
The US dollar weakened slightly on Tuesday (April 7th) ahead of the US deadline for Iran to reopen the Strait of Hormuz. At 8:55 a.m. ET, the dollar index fell 0.1% to 99.88, while EUR/USD rose 0.2% to 1.1563 and GBP/USD gained 0.1% to 1.3257.
Although the correction was limited, the market believes the dollar remains relatively desirable as a hedge amid uncertainty over the continued conflict. ING believes persistently high energy prices and the solid US economy remain supportive factors for the dollar, even as short-term sentiment is affected by diplomatic headlines and the risk of conflict.
President Donald Trump has ratcheted up the pressure by declaring that he will resume attacks on Iranian bridges and power plants if Tehran does not agree to a cessation of hostilities and the reopening of Hormuz by Tuesday evening. Trump also left room for a diplomatic solution, as Iranian officials called Pakistani mediation entering a "critical and sensitive" stage.
On the ground, Iran and Israel reportedly continue to exchange attacks. The Wall Street Journal quoted officials as saying the US military is preparing strike options against energy targets in Iran. Tehran itself has rejected a proposed 45-day pause from US and regional mediators in exchange for opening Hormuz, keeping the risk of escalation and currency volatility high ahead of the deadline.
Source: Newsmaker.id
