The US dollar remained on shaky footing on Thursday after broad losses, as investors assessed whether the fragile two-week ceasefire between the United States and Iran would hold.
The ceasefire appeared precarious, with Israel continuing military operations against the Iran-aligned Hezbollah in Lebanon, while Tehran accused both Israel and the US of violating the agreement and warned that proceeding with peace talks would be “unreasonable.”
The Strait of Hormuz remained closed to vessels without a permit, pushing oil prices higher. Sho Suzuki, a market analyst at Matsui Securities, said, “There are probably some doubts emerging over whether the ceasefire expectations can really be sustained or whether a ceasefire can even be finalised in the first place.”
The dollar index, measuring the greenback against a basket including the yen and the euro, fell 0.01% to 99.05. The euro rose 0.01% to $1.1663, and sterling inched up 0.01% to $1.3393. The yen surrendered some gains from the previous day, weakening 0.13% to 158.8 per dollar.
Suzuki noted that prolonged Middle East tensions could push fiscal policy toward expansion, contributing to yen weakness. The overnight indexed swap (OIS) market indicated a 55% probability of a Bank of Japan interest rate hike in April, according to Tokyo Tanshi data. A collapse of the ceasefire could reduce these expectations, further weakening the yen.
BOJ Governor Kazuo Ueda was scheduled to appear in parliament at 0415 GMT on Thursday.
The US dollar had benefited during the Iran war because the US is a net energy exporter, insulating it from shocks that heavily oil-dependent economies like Japan and parts of Europe faced. The five-week conflict disrupted global oil and gas supplies, eroding investor confidence.
Analysts said the uneasy truce increased Iran’s leverage over shipping through the Strait of Hormuz. President Donald Trump had backed off his threats to attack Iranian civilian infrastructure, leaving Iran with stronger bargaining power.
The US was scheduled to release February personal spending and the PCE deflator on Thursday. Despite some improved sentiment following the ceasefire, the dollar-yen pair was expected to remain range-bound in Tokyo, although strong US data could trigger a rebound, Akihiko Yokoo of Mitsubishi UFJ Bank said.
Elsewhere, the Australian dollar fell 0.13% to $0.7033, while the New Zealand dollar rose 0.07% to $0.5826. In cryptocurrencies, Bitcoin dropped 0.61% to $70,944.20 and Ethereum fell 1.35% to $2,180.21.
Erizia Rubyjeana
