Dollar Hits Weekly High Amid Iran Ceasefire Concerns
The US dollar strengthened to its highest level in a week on Tuesday (April 21) amid growing concerns that a ceasefire in the US-Israel war against Iran will take longer to reach, prolonging disruptions in the Strait of Hormuz. The dollar index (DXY) rose 0.36% to 98.43, while the euro fell 0.44% to US$1.1736. The yen weakened 0.37% to 159.39 per dollar, and the pound fell 0.29% to US$1.3493.
Sentiment was fueled by a combination of conflicting diplomatic headlines. Iran said it had not yet decided whether to attend peace talks, a day before the ceasefire ended, after US forces boarded an Iranian oil tanker at sea. Uncertainty also increased after the White House stated that Vice President JD Vance had not yet departed for Pakistan and was still attending additional policy meetings, despite markets previously reacting to speculation about his departure schedule.
The dollar's strength was also supported by solid US data. Retail sales rose stronger than expected in March, with rising gasoline prices driving a surge in gas station receipts, while tax refunds supported spending elsewhere. On the policy front, Fed Chair nominee Kevin Warsh called for a "regime change" at the central bank, including a new approach to inflation control and communication changes that could lead Fed officials to be more cautious in their guidance. Futures markets now price in around a 30% chance of the Fed delivering one 25-bps rate cut this year.
For the FX market, the primary channel is clear: if peace prospects recede further, energy and inflation risk premiums could persist for longer, driving risk off and supporting the dollar. The next focus will be on Iran's participation in the talks, the status of the ceasefire ahead of the deadline, the direction of US oil and yields, and policy signals from the Fed regarding energy inflation dynamics. (Arl)*
Source: Newsmaker.id
