Dollar Strengthens, Yen and Euro Boosted by Middle East Tensions
The US dollar strengthened on Thursday (May 21) after a Reuters report said that Iran's Supreme Leader, Ayatollah Mojtaba Khamenei, had ordered near-weapons-grade uranium to remain domestically, which could complicate US-Israeli peace negotiations with Iran. The dollar's rise was driven by safe-haven demand amid surging energy prices that have weighed on oil-importing economies like Japan and the eurozone.
USD/JPY rose 0.2% to 159.110 yen, after declining for the first time in eight sessions on Wednesday. Bank of Japan board member Junko Koeda added support to the yen with hawkish comments about the need for further interest rate hikes as inflation approaches its 2% target.
EUR/USD fell 0.26% to $1.15935, after hitting its lowest level since April 7. Eurozone economic activity shrank at its strongest pace in more than two and a half years in May, driven by a war-related surge in living costs and job cuts in the service sector. Traders are now pricing in two ECB rate hikes this year, with a greater than 50% chance of a third tightening.
GBP/USD fell 0.4% to $1.34334, boosted by weaker-than-expected PMI data. AUD/USD weakened 0.4% to $0.7124 after Australian unemployment data rose to its highest level since 2021, reducing expectations of a Reserve Bank of Australia rate tightening.
The dollar index (DXY) rose 0.2% to 99.365, near the previous session's peak of 99.472, its highest level since April 7. Market focus remains on the inflationary impact of high energy prices, as the Strait of Hormuz remains largely closed to shipping.
Variables to monitor: developments in US-Iran negotiations, movements in oil and energy prices, Fed and ECB policy moves, and key employment data. (arl)*
Source: newsmaker.id
