The U.S. dollar held steady on Tuesday as there were no signs of progress in talks aimed at ending the war in the Middle East, pushing oil prices higher and raising investor concerns that interest rates may need to remain elevated to counter inflationary pressures.
Investors now fear that the ceasefire in effect since April 7 may be at risk, with fighting potentially resuming in the conflict that began in late February, has killed thousands, and disrupted critical energy flows.
With the strategically vital Strait of Hormuz remaining largely closed, Brent crude futures rose 0.3% to $104.55 per barrel, while U.S. West Texas Intermediate crude gained 0.13% to $98.17 per barrel.
U.S. President Donald Trump said on Monday that the ceasefire with Iran was “on the verge of collapse,” after Tehran’s response to a U.S. proposal to end the war made clear that the two sides remain far apart on several issues.
Currency markets remained calm at the start of the Asian trading session, with attention shifting to Trump’s visit to China later this week. U.S. Treasury Secretary Scott Bessent is also currently in Asia for meetings in Japan and South Korea.
The euro held steady at $1.1775, while the British pound remained unchanged at $1.3602.
The U.S. Dollar Index, which measures the greenback against six major currencies, was unchanged at 97.98.
The dollar initially benefited from safe-haven demand when the war broke out, but has since surrendered most of those gains and remains volatile amid uncertainty over both a potential agreement and the fragile ceasefire.
Christopher Wong, currency strategist at OCBC, said Trump’s rejection of Iran’s response to the U.S. peace proposal kept markets cautious and supported the dollar.
“However, the dollar’s gains remain limited, suggesting markets do not view the latest headlines as a full-blown risk-off shock,” Wong said, adding that any formal collapse in diplomatic talks or renewed military escalation could trigger a stronger market reaction.
Later on Tuesday, investors will focus on the U.S. inflation report, which is expected to show consumer prices rising 0.6% last month, following a 0.9% jump in March, according to economists surveyed by Reuters. Forecasts ranged from 0.4% to 0.9%.
The data is expected to reinforce expectations that the Federal Reserve will keep interest rates unchanged for an extended period. Traders have largely ruled out rate cuts this year, compared with pre-war expectations of two cuts.
The Japanese yen held steady at 157.30 per dollar.
Japan and the United States reaffirmed close cooperation on currency movements, Japanese Finance Minister Satsuki Katayama told reporters after meeting U.S. Treasury Secretary Scott Bessent on Tuesday.
The Australian dollar fell 0.14% to $0.7240 ahead of Australia’s budget announcement, while the New Zealand dollar slipped 0.07% to $0.5959. Bitcoin also declined 0.3% to $81,551 in early trading.
Reuters
