NEW YORK: The US dollar was not far from its highest levels in almost 11 months on Tuesday with investors pausing ahead of a US-imposed deadline for Iran to reopen the Strait of Hormuz to shipping or face attacks on its infrastructure.
The war in the Middle East and the closure of the chokepoint in the Gulf have sent energy prices soaring and driven investors to dollars as the most effective safe haven, pushing the greenback higher. Iran showed no sign of agreeing to US President Donald Trump’s demand that it open the Strait of Hormuz before his 8 p.m. Eastern Time (0000 GMT) deadline. “No one knows whether the deadline is another bout of maximalist pressure from the White House, but until there is news of a ceasefire, or perhaps a prolonged postponement of the current deadline, the dollar is likely to stay bid,” said Chris Turner, head of forex research at ING.
Brent crude futures hovered around USD110 a barrel as Iran’s rejection of the US ceasefire proposal has kept tensions elevated. “The Iranian leadership has demonstrated, surprisingly to many it seems, that it can exercise full control over the Strait,” said Thu Lan Nguyen, head of forex and commodity research at Commerzbank.
“And it is already becoming apparent that Iran intends to utilise this control for its long-term interests,” she added. The US dollar index was at 100.00. It hit 100.64 last week, its highest since May 2025.
The yen slipped to 159.80 to the dollar, not far from multi-decade troughs and levels that drew intervention in 2024. Investors will also closely watch US economic data for clues on the Federal Reserve’s policy path, with solid readings likely to prompt investors to price in further rate hikes if energy prices rise again.
“Markets are beginning to focus on the risks to growth, as much as to inflation, from demand destruction,” said Bob Savage, global head of market strategy at BNY.
PCE inflation for February is due on Thursday, but investors will closely watch some demand data as well, including durable goods orders on Tuesday, and the Michigan consumer sentiment on Friday. The minutes from the FOMC meeting in March will be released on Wednesday and are expected to provide indications on the policy outlook.
The euro was roughly unchanged at USD1.1550, while traders priced in three European Central Bank rate hikes by year-end and ECB officials reiterated the central bank could act to tame inflation.
“Any pushback against an April rate hike could be a euro negative,” said ING’s Turner. The ECB’s Dimitar Radev said the central bank must be ready to raise rates swiftly if signs of persistent price pressures emerged, and Belgian central bank chief Pierre Wunsch said a move in April could not be ruled out.
The Australian and New Zealand dollars, which tumbled as fighting and Iranian strikes on Middle East energy infrastructure intensified late in March, were off lows but trading softer at USD0.6927 and USD0.57 respectively.
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