US Dollar Steady, Yen Holds Amid Iran War Uncertainty
The US dollar moved relatively steadily in trading on Tuesday (May 5) as markets monitored the latest developments in the Iran conflict, while the Japanese yen remained calm after allegations of intervention by Tokyo authorities last week triggered a sharp strengthening of the currency. The dollar index, which measures the greenback's performance against six major currencies, remained within the same range after slightly strengthening earlier in the week. The euro and the pound sterling also traded unchanged.
The ceasefire in the Middle East has been called into question again after the US and Iran launched new attacks in a struggle for control of the Strait of Hormuz. Conflicting reports regarding shipping traffic in the strategic waterway have added to market uncertainty. Market participants are seen adopting a "wait-and-see" approach as news flows can change rapidly and the direction of the conflict remains unclear.
In the Asia-Pacific region, the Australian dollar weakened after the country's central bank raised interest rates again to curb inflation. The monetary authority also revised up its inflation projections and cut its growth and employment outlook due to the impact of the global energy shock. The market now believes the possibility of further interest rate hikes remains open until the end of the year.
The Japanese yen traded steadily after experiencing sharp gains in recent sessions. Data last week indicated that Tokyo was spending heavily to support its currency, although analysts believe this measure may not be effective in the long term. The wide interest rate differential between Japan and other developed economies, coupled with fiscal pressures and surging energy prices, continues to weigh on the yen.
Analysts believe that USD/JPY movements in the near term have the potential to remain volatile within a wider range, with certain psychological levels considered politically sensitive. The yen's direction is also heavily influenced by oil prices and developments in the Middle East conflict. If energy prices surge again or remain high, pressure on the yen is expected to increase again.
Source: Newsmaker.id
