The Dollar hovered near its recent peaks on Tuesday as traders awaited a US deadline demanding that Iran reopen the Strait of Hormuz to shipping or risk strikes on its infrastructure.
Ongoing conflict in the Middle East and the shutdown of the key Persian Gulf passage have driven energy prices sharply higher, prompting investors, particularly in Asia, to seek safety in the Dollar, boosting its value.
Hopes for a possible deal or breakthrough kept further Dollar buying in check over Easter, although markets remained uneasy, with few willing to sell Dollars ahead of US President Trump’s 8pm Eastern Time deadline.
The Yen weakened to 159.79 per Dollar, staying close to multi-decade lows that previously prompted intervention in 2024. Meanwhile, the Euro traded at $1.1533 and Sterling at $1.3227, both hovering slightly above their late-March multi-month lows, Reuters reports.
Trump said on Monday that Iran could be “taken out” in a single night, adding that “that night might be tomorrow night.”
He pledged to target Iranian power plants and bridges, dismissing concerns that these actions could be considered war crimes or turn public opinion in Iran against the US.
Iran and Israel exchanged attacks on Tuesday after Tehran refused to reopen the Strait. Israel reported carrying out a series of airstrikes aimed at Iranian government infrastructure, while defence systems intercepted Iranian missiles over Israel and Saudi Arabia.
Furthermore, the Australian and New Zealand Dollars, which slid sharply as conflict escalated and Iranian strikes on Middle Eastern energy infrastructure intensified in late March, have recovered from their lows but remain subdued at $0.6917 and $0.57, respectively.
The South Korean Won is still trading on the weaker side of 1,500 per Dollar, a level previously seen only during crises such as 2009 and the late 1990s. Whereas Indonesia’s Rupiah fell to a record low, while China’s Yuan managed to maintain the relatively stable levels it held through March.
“The Dollar may ease modestly further in the near term because of optimism the US will 'end' the Iran war,” according to Commonwealth Bank of Australia analysts.
“However, there are three participants in the war: the US, Israel and Iran. What matters for the world economy and currencies is whether the Strait of Hormuz is open. The US leaving the conflict does not re-open the Strait.”