Dollar held higher as Trump’s second term looms

The dollar was shy of recent highs on Tuesday as traders counted on a US-imposed deadline for Iran to counter attacks on Persian Gulf shipping or its infrastructure.

War in the Middle East and the closure of the Gulf’s chokepoint at the Strait of Hormuz have boosted energy prices and pushed investors to the dollar as the most effective safe haven, pushing the greenback higher, particularly in Asia.

Hopes of some sort of deal or breakthrough have halted further dollar buying through Easter, but markets remain subdued and there are few big sellers of the dollar ahead of US President Donald Trump’s 8pm Eastern Time (midnight GMT) deadline.

The yen is trading at 159.67 to the dollar, not far from multi-decade troughs and levels that could bring intervention in 2024. The euro bought $1.1539 and sterling $1.3235, slightly above multi-month lows hit in late March.

Brent Donnelly, president of Spectra Markets, said, “((The) market is long the USD in case of further growth, but stocks, gold and CNH are trading well and putting a lid on the dollar’s gains.”

“It’s hard to make any high-confidence predictions here… We look forward to 8pm and see what kind of attacks Iran and the US/Israel launch in the meantime.”

Trump said on Monday that Iran could be “taken out” overnight “and that night could be tomorrow night.” He vowed to destroy Iranian power plants and bridges, allaying concerns that such actions would be war crimes or alienate the Iranian people.

Tehran has rejected the ceasefire and says a permanent end to the war is needed. Israel has claimed responsibility for the death of an Iranian intelligence chief and the attack on a petrochemical plant in the south of Iran in recent days.

The Australian and New Zealand dollars, which were rocked in late March by a spat over Middle East energy infrastructure and an Iranian strike, edged higher to $0.6917 and $0.5714 respectively, although trade was tentative.

South Korean wins remain on the weak side of 1,500, a level only plumbed in 2009 and following crises in the late 1990s. Indonesia’s rupiah hit a record low on Monday, while China’s yuan was steady in offshore trade.

“The dollar may ease modestly further in the near term on optimism the US will ‘end’ the Iran war,” analysts at the Commonwealth Bank of Australia said in a note.

“However, there are three participants in the war: the US, Israel and Iran. What matters to the world economy and currency is whether the Strait of Hormuz is open. The US is not leaving the conflict and reopening the strait.”