Dollar Holds Steady at Six-Week High, Inflation Pressures and Iran Negotiations in Focus
The US dollar held near a six-week high on Friday (May 22), boosted by speculation about a possible short-term deal to end the Middle East war and the potential for the Federal Reserve to raise interest rates if inflation remains high. The Dollar Index (DXY) edged up 0.04% to 99.24, while the euro fell 0.06% to $1.1611 and the pound strengthened 0.11% to $1.3444.
Diplomatic Developments and Energy Risks:
US Secretary of State Marco Rubio stated that progress toward a deal with Iran is "not yet complete."
Iran and the US remain at odds over uranium stockpiles and control of the Strait of Hormuz.
Ongoing energy supply disruptions are expected to put downward pressure on consumer prices, increasing the likelihood of tighter monetary policy.
Inflation and Consumer Sentiment:
A University of Michigan survey found that US consumer sentiment fell to an all-time low in May, driven by rising gasoline prices and rising inflation expectations.
Fed Governor Christopher Waller supported the removal of the "easing bias" language from the central bank's policy statement, opening the door to further interest rate hikes.
Impact on global currencies:
The Japanese yen (USDJPY) weakened 0.1% to 159.11, remaining vulnerable despite Tokyo's intervention several weeks ago.
The Australian dollar (AUDUSD) fell 0.15% to $0.7136, impacted by jet fuel and diesel shortages that are hurting the industrial sector.
Other central banks, including the ECB, are likely to move more aggressively than the Bank of Japan, making the yen less attractive to investors seeking yield.
Currency analysts warn that global fundamentals, particularly the resolution of the Iran conflict and energy prices, will determine the direction of major currencies in the coming weeks.
Source: Newsmaker.id
