The U.S. Dollar hovered near a week-and-a-half high on Thursday, as the deadlock in peace talks between Iran and the United States to end the war pushed oil prices back above $100 per barrel, souring investor sentiment.
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Tehran seized two vessels in the Strait of Hormuz on Wednesday, exacerbating tensions after U.S. President Donald Trump extended the ceasefire with Iran indefinitely, with no sign of resuming peace negotiations.
The two sides remain at odds over the ceasefire, the naval blockade, the nuclear issue, and control of the Strait. This has left the strategic waterway effectively closed, sending shockwaves through the energy sector and dealing a heavy blow to global economies.
The Euro stood at $1.1712 after hitting its lowest level since April 13 earlier in the session. The single currency is on track for a 0.4% weekly decline, its first in four weeks. Meanwhile, the British Pound remained steady at $1.3497.
The Australian Dollar reached $0.7165, while the New Zealand Dollar traded at $0.59045. Against the Japanese currency, the Dollar edged down 0.02% to 159.48 Yen.
In March, the Dollar benefited from safe-haven demand following the outbreak of the war. However, the prospect of a peace deal and a ceasefire earlier this month spurred risk appetite, causing the Dollar to erase most of those gains.
The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, stood at 98.644, near its highest level since April 13. The index is heading for a modest 0.4% gain this week after two weeks of losses.
"Despite Trump extending the ceasefire, disruptions are escalating as Iran refuses to reopen the Strait of Hormuz and the U.S. naval blockade persists, signaling a prolonged supply interruption," noted Sky Masters, head of markets research at the National Bank of Australia. Masters added that the potential consequences are being underestimated, and that inflationary pressures will likely persist through the end of the year.
Fuel prices have surged due to the nearly two-month-old war, eroding consumer confidence to record lows and wiping out market expectations for interest rate cuts this year.
According to a Reuters poll of economists, the Federal Reserve is expected to wait at least six months before cutting interest rates this year, as war-induced energy shocks continue to stoke already high inflation.
— Reuters
