NEW YORK: The US dollar rose slightly on Wednesday and was on track for its first gain in eight sessions after falling to levels not seen since the start of the Iran war, as investors gauged the likelihood that peace talks would resume shortly.
US President Donald Trump said the war with Iran could end soon, telling the world to watch out for an “amazing two days,” while US forces imposing a blockade turned back vessels leaving Iranian ports.
A senior official said on Wednesday, however, that the US has not formally agreed to the extension of its ceasefire with Iran, although there is continued engagement between the two countries to reach a deal.
The war has effectively shut the Strait of Hormuz, a crucial waterway for a fifth of global oil and gas shipments as well as other key products such as fertilizer, since the US-Israel attacks on Iran began on February 28, sending oil prices surging and igniting concerns about the hit to global growth and inflation.
“We’re trying to figure out if negotiations are going to continue, if the ceasefire will continue, and if ultimately tensions can be established as solidified or eased, but no one knows exactly where things are going,” said Juan Perez, senior director of trading at Monex USA.
“Not only are we at the mercy of the headlines over the conflict, but now the focus is going to be on economic growth.”
The dollar index, which measures the greenback against a basket of currencies, was up 0.03 percent on the day to 98.11 after climbing to 98.286, with the euro off 0.01 percent at USD1.1794.
US crude fell 0.05 percent to USD91.23 a barrel and Brent rose to USD94.81 per barrel, up 0.02 percent on the day.
The European Central Bank is not yet in position to determine if the current oil price-driven inflation shock is transitory or if it requires it to raise interest rates, ECB President Christine Lagarde said on Tuesday.
The dollar index had dropped as low as 97.968 on Tuesday, its weakest level since March 2, the first trading day after the US-Israeli war with Iran began, but investors said robust demand for US assets and waning prospects for US interest rate cuts should buttress it against sharper declines.
The seven-session losing streak for the dollar is its longest since a nine-session skid that ended on December 3, when investors were largely expecting at least two rate cuts from the Federal Reserve this year.
US Treasury Secretary Scott Bessent told CNBC the economy will be slower this quarter amid the Iran war, but that it is in good shape and will rebound, adding that oil prices do not appear to be weighing on inflation expectations.
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