Synopsis
The dollar’s rise stalled on Thursday, offering relief to the euro on hopes that the Middle East conflict will be shorter than expected. Investors seized on information indicating possible negotiations between Iran and the CIA, although Tehran denied it. Upbeat U.S. services data also supported sentiment, although the dollar maintained its weekly gains amid market volatility.
The dollar halted its rise, offering relief to the euro on hopes that the Middle East conflict could be shorter than expected, despite Iran’s refusal to negotiate.The dollar halted its meteoric rise on Thursday, offering some respite to the battered euro as investors clung to shaky assumptions that the war in the Middle East might not last as long as initially expected.
Investors were quick to rejoice at a report that Iranian intelligence officials appeared open to negotiations with the CIA to end the war despite Tehran’s later denial, underscoring tense sentiment over a conflict that has roiled global markets.
The dollar weakened further from its more than three-month high hit earlier this week and settled at 98.78 against a basket of currencies.
The euro, meanwhile, rose slightly to $1.1636, after sliding to its lowest level in more than three months on Tuesday, while the pound sterling stabilized at $1.3366.
“I wouldn’t say it was particularly good news, because Iran kind of rejected the report, and it’s still unclear exactly how long the war would last and what its impact would be, but the markets certainly took a relatively big step back. blood point of view,” said Carol Kong, currency strategist at the Commonwealth Bank of Australia.
She added that sentiment was also supported by upbeat U.S. economic data released on Wednesday, which showed service sector activity rose to a more than 3-1/2 year high in February as businesses restocked inventories in anticipation of strong demand.
Still, the dollar maintained its more than 1% gain for the week so far, becoming one of the few winners during a volatile few sessions that dragged stocks, bonds and, at times, even safe-haven precious metals lower.
Soaring energy prices following the fallout from the Middle East war have fueled fears of a resurgence in inflation that could derail major central banks’ rate outlooks.
“Markets have largely viewed the war in the Middle East as an inflation risk,” said Bas van Geffen, macroeconomic strategist at Rabobank.
“In the case of the (Federal Reserve) and the Bank of England, this means fewer rate cuts are planned, but euro money markets now put the likelihood that the (European Central Bank) will have to raise rates before the end of the year at around 40%.”
The yen also found some support on Thursday from a weaker greenback and rose 0.2% to 156.78 per dollar.
The Australian dollar rose 0.14% to $0.7085, extending its 0.57% gain from the previous session, while the New Zealand dollar was little changed at $0.5942.
Although generally a risk-sensitive currency, the Aussie benefited from a rare safe-haven offering this week as the country’s energy abundance offset the impact of rising oil prices.
Elsewhere, the offshore yuan rose 0.12% to 6.8860 per dollar, ahead of the onshore opening.
China has set its 2026 economic growth target at between 4.5% and 5%, a slight decline from last year’s pace of 5%, leaving room for greater, although not decisive, efforts to reduce industrial overcapacity and rebalance the economy.
Bitcoin and Ether fell about 1% each, after rebounding sharply overnight as risk appetite improved.
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