The US Dollar traded close to a three-week low on Wednesday as investors weighed the latest developments in the Middle East. The conflict had previously boosted the greenback’s safe-haven appeal, amid concerns that rising oil prices could fuel inflation.
Meanwhile, the Australian Dollar climbed to a three-week high against its US counterpart. Reserve Bank of Australia Deputy Governor Andrew Hauser told a Citi conference that the inflation outlook had deteriorated materially.
The Aussie gained 0.2% to $0.70155 at the time of writing, after earlier reaching $0.70289, its highest level since 29 September.
The US Dollar index, which tracks the greenback against a basket of six major currencies, held steady at 101.79 after falling 0.2% on Tuesday. It had earlier slipped to 101.50, its lowest level since 1 October.
Investors have sought refuge in the Dollar amid market turbulence triggered by the US-Israeli war with Iran, with the United States’ energy independence providing additional support for the currency, Reuters reports.
Oil prices edged closer to a five-month high as markets assessed an Iranian media report claiming Tehran had told Pakistan’s army chief it would not negotiate with Washington until its demands were met. The report has yet to receive official confirmation.
The Dollar has also faced headwinds from falling US Treasury yields this month and easing demand for safe-haven assets. Wall Street enjoyed a strong session overnight as the technology earnings season got underway, with investors digesting results from SpaceX.
The US Dollar was little changed at 158.16 Yen, while gaining ground against the Euro and Pound, trading at 1.1224 per Euro and 1.33735 per Pound.
Investors remained cautious about the Euro as France grapples with widespread anti-government protests and a deteriorating fiscal outlook.
The French government announced on Tuesday that it would deploy extra police and troops as part of a major security operation ahead of further protests planned for Saturday. Officials also acknowledged shortcomings in their response to the violence that erupted over the previous weekend.
Several major central banks are set to announce their latest monetary policy decisions on consecutive days from next Wednesday, with the US Federal Reserve, European Central Bank and Bank of Japan all expected to leave interest rates unchanged, according to market forecasts.
The Reserve Bank of New Zealand and the Bank of Canada will also announce their decisions on the same day as the Fed, with traders anticipating quarter-percentage-point rate increases from both institutions.
The New Zealand Dollar fell 0.2% to $0.5675 on Wednesday, while the Canadian Dollar was little changed at C$1.4064 per US Dollar.