Dollar on defensive as markets hope for best on Middle East

Read a summary of this article on FAST.
Get bite-sized news via a new
cards interface. Give it a try.
Click here to return to FAST Tap here to return to FAST
FAST

SYDNEY, May 7 : The dollar remained on the defensive on Thursday as hopes for a de-escalation in the Iran-U.S. war supported oil-exposed currencies, while Tokyo resumed its verbal intervention in support of the yen keeping speculators cautious.

Iran said on Wednesday it was reviewing a U.S. peace proposal that sources indicated would formally end the war but leave unresolved key U.S. demands that Iran suspend its nuclear program and reopen the Strait of Hormuz.

Analysts were worried any agreement that did not open the vital waterway to shipping would likely see oil prices rise again, with Brent edging 0.8 per cent higher in early trading.

"It remains far from clear that there is any material movement toward reopening the Strait, or if we are instead stuck in a rebranded 'ceasefire with no oil' purgatory," wrote Helima Croft, head of global commodity strategy at RBC Capital Markets.

CNA Games

Guess Word
Crack the word, one row at a time

Buzzword
Create words using the given letters

Mini Sudoku
Tiny puzzle, mighty brain teaser

Mini Crossword
Small grid, big challenge

Word Search
Spot as many words as you can
Show More
Show Less

"A corner of the market will undoubtedly view a one-page memorandum to resume negotiations over the next thirty days as significant progress," she added. "However, an MoU is unlikely to translate into an immediate resumption of shipping traffic and major production restarts."

Hopes for de-escalation had seen oil prices slide overnight, easing inflationary fears and pulling down Treasury yields as markets pared back the risk of U.S. rate hikes.

That left the dollar index back at 97.950 and well short of last week's top of 99.092.

The pullback in oil had boosted the euro, given the continent is far more reliant on imported oil than the United States, and it was 0.1 per cent firmer at $1.1757 having touched a two-week top of $1.1797 overnight.

The yen had gotten a further lift from speculation the Japanese authorities had intervened on Wednesday to buy the currency, sending the dollar as low as 155.00 at one stage.

The dollar was last trading at 156.15, with dealers on guard after Japan's top currency diplomat Atsushi Mimura said the country was not restricted on intervention.

U.S. Treasury Secretary Scott Bessent will reportedly meet Japan's Prime Minister Sanae Takaichi next week to discuss curbing speculative yen selling, among other issues.

Sources told Reuters that authorities intervened on Thursday last week, with money market data suggesting they sold about $35 billion to support the yen. Since then, the market has seen three abrupt spikes in the yen through to Wednesday.

Newsletter

Week in Review

Subscribe to our Chief Editor’s Week in Review

Our chief editor shares analysis and picks of the week's biggest news every Saturday.

Sign up for our newsletters

Get our pick of top stories and thought-provoking articles in your inbox

Subscribe here

Get the CNA app

Stay updated with notifications for breaking news and our best stories

Download here

Get WhatsApp alerts

Join our channel for the top reads for the day on your preferred chat app

Join here