Dollar holds near 1-1/2-week high as Iran-US standoff persists

HONG KONG: The ​dollar wobbled near a 1-1/2-week high on Thursday as a standoff between Iran and the U.S. ‌in the Middle East war and lack of progress in peace talks pulled oil prices back above $100 per barrel, weighing on investor sentiment.

Tehran seized two ships in the Strait of Hormuz on Wednesday, escalating tensions after US President Donald Trump extended a ​ceasefire with Iran indefinitely with no sign of peace talks restarting.

The two sides now remain ​divided on a ceasefire, blockade, nuclear issues and control of the strait, leaving the strategic waterway still effectively shut and ⁠triggering an energy shock in a blow to economies across the world.

The euro was fetching $1.1712, having touched its ​lowest since April 13 earlier in the session. The single currency is headed for a 0.4% decline in the ​week, its first drop in four weeks. Sterling stood at $1.3497.

The Australian dollar was steady at $0.7165, not far from the four-year high it touched last week. The New Zealand dollar traded at $0.59045 . Against the yen , the US dollar nudged down 0.02% ​to 159.48 yen.

The dollar benefited in March on safe-haven demand as the war erupted but the prospect ​of a peace deal and a ceasefire at the start of this month spurred a risk-on rally, with the greenback ‌giving ⁠up most of its gains.

The US dollar index , which measures the currency against a basket of six major peers, was at 98.644, near its highest level since April 13. The index is on track for a moderate 0.4% gain this week following two weekly drops.

“Despite Trump’s ceasefire extension, tensions remain elevated with Iran refusing to ​reopen Hormuz while US ​naval blockades persist, raising ⁠the risk of prolonged supply disruption,” Skye Masters, head of markets research at National Australia Bank, said in a note.

Tail risks are under-priced, and inflation pressures ​will linger well into year-end, Masters said.

The nearly two-month war in the Middle ​East has led ⁠to soaring fuel prices, eroding consumer confidence to a record low and wiping out market pricing for rate cuts this year.

The U.S. Federal Reserve will wait at least six months before cutting interest rates this year, ⁠according to ​a Reuters poll of economists, as war-driven energy shocks reignite already-elevated ​inflation.

Focus will be on US weekly initial jobless claims and PMIs due to be released later on Thursday for clues on whether the impact of soaring ​energy prices is filtering through to the broader economy.