Iran Proposal Lifts Sentiment, Dollar Falls Slightly
The US dollar fell slightly on Monday (April 27th) as hopes for a deal to end the Middle East war wavered, prompting investors to hold positions ahead of a series of central bank meetings this week. The dollar index (DXY) fell 0.3% to 98.32, while Brent rose 1% to US$106.40/barrel.
Sentiment was briefly boosted by an Axios report that Iran submitted a new proposal to the US through Pakistani mediators regarding reopening shipping lanes and ending the war, with nuclear discussions postponed to a later stage. However, some market participants believe the nuclear issue remains a key sticking point, as a deal that does not address Iran's nuclear program risks political difficulties in the US.
The dollar's movement reflects a tug-of-war between two channels. On the one hand, the previous escalation of the war had benefited the dollar as a safe-haven asset in March. On the other hand, hopes for diplomacy since early April have eroded that safe-haven premium, although the dollar has tended to stabilize recently after the US-Iran talks stalled.
In the G10, EUR/USD rose 0.15% to US$1.1741. Markets believe the Fed is likely to hold interest rates, and the ECB is also expected to remain on hold at this week's meeting, although its policy bias is considered more hawkish in response to the energy shock to oil-importing regions.
Asia's focus is on the yen, which has re-locked near the sensitive 160 level. USD/JPY fell to 159.17, ahead of the Bank of Japan's decision on Tuesday, which is expected to hold interest rates but signal a readiness to tighten as early as June. The 160 level remains a market-watched area due to the potential for resurfacing intervention concerns if the BOJ signals too dovishly.
Markets will be monitoring confirmation of the follow-up US-Iran meeting and the details of the proposal, the dynamics of Hormuz flows through oil movements, and the tone of statements by the Fed, ECB, and BOJ—especially the yen's response around 160. (Arl)*
Source: Newsmaker.id
