NEW YORK: The dollar firmed on Tuesday as renewed US strikes on Iran dented optimism for a near-term ceasefire, boosting demand for the greenback as investors turned cautious. Iran said the US had violated a ceasefire after it conducted what it called defensive strikes in southern Iran, while US Secretary of State Marco Rubio said that negotiating a deal to halt the conflict could “take a few days.”
Hopes for a peace deal had earlier pushed oil prices below USD100 a barrel and eased demand for the greenback.
But demand for the dollar has picked up slightly as investors grow less confident about a swift end to the conflict, said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
“It’s pretty straightforward what happened: we go home over the weekend, thinking we’re close to a ceasefire and now there are new hostilities. So I think the market is waiting for developments,” Chandler said. The euro was down 0.15 percent against the dollar at USD1.16265. The dollar strengthened 0.29 percent to 0.785 against the Swiss franc .
The dollar index was up slightly 0.135 percent at 99.15 after falling 0.3 percent the previous day.
Oil prices clawed back some of their losses at the start of trading on Tuesday on news of the US strikes. Brent crude futures rose 3.89 percent to USD98.87 a barrel after dropping 7 percent on Monday. Data showed that US consumer confidence eased in May as worries about inflation linked to the war with Iran intensified, offsetting an improvement in households’ perceptions of the labor market.
“If you look at the rally in the stock market, which is a bit of catch up from yesterday, and oil prices - I’d say the market is a bit nervous. I think that’s really the story. The economic data doesn’t mean so much right now,” Chandler added.
The British pound fell 0.3 percent to USD1.3465.
The shift in sentiment weighed on the Japanese yen, pushing it closer to the 160-per-dollar level that traders see as a potential trigger for intervention by Tokyo. The Japanese yen weakened 0.2 percent against the greenback to 159.24 per dollar.
Treasury yields fell sharply on Tuesday as US markets returned from a holiday, catching up on a drop in global bond yields on expectations of a peace deal. The yield on benchmark US 10-year notes fell 8 basis points to 4.493 percent.
The Australian dollar, often viewed as a proxy for risk, was 0.1 percent down at USD0.71675. The dollar strengthened 0.01 percent to 6.784 versus the offshore Chinese yuan.
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