The US dollar maintained its upward momentum during Thursday’s early Asian market session as financial markets evaluated whether tensions involving the United States, Israel and Iran might be cooling down, while simultaneously reducing expectations for potential Federal Reserve interest rate increases.
Currency trading showed the dollar holding steady against the Japanese yen at 159.41, remaining close to its highest point since 2024. The Australian dollar slipped 0.1% to $0.6943, while New Zealand’s currency held firm at $0.5806.
Iran’s top diplomat announced Wednesday that the nation is examining an American proposal aimed at ending the Gulf war, though officials indicated no plans to participate in broader discussions about resolving the expanding Middle Eastern crisis. Due to continued geopolitical instability, the dollar index — which tracks the greenback’s performance against six major currencies — climbed 0.5% to 99.641, marking its largest single-day increase in a week.
“Markets remain decisively headline driven, with a square focus on weighing up whether recent news marks a genuine de-escalation attempt, or a precursor to a new kinetic equilibrium,” analysts from Westpac wrote in a research report.
Following the shutdown of the Strait of Hormuz that caused energy costs to surge, financial traders are reconsidering previous inflation forecasts and becoming increasingly convinced the Federal Reserve will maintain current policy throughout the remainder of the year. Federal funds futures now indicate a 70.6% likelihood that America’s central bank will keep rates unchanged at its December meeting, up from 60.2% probability the previous day, based on CME Group’s FedWatch tracking tool.
The dollar remained unchanged against China’s yuan at 6.9026 in offshore markets after President Donald Trump announced plans to meet with Chinese leader Xi Jinping on May 14-15 during Trump’s first China visit in eight years, following delays caused by the Iranian conflict.
Europe’s common currency stayed flat at $1.1560, finding stability after declining for two consecutive days following Wednesday remarks from European Central Bank chief Christine Lagarde, who suggested the possibility of eurozone interest rate increases if Middle Eastern warfare continues driving regional inflation higher.
Britain’s pound remained steady at $1.3365, working to avoid a third straight day of losses after Wednesday’s data revealed consumer price inflation stayed at 3.0% in February, matching January’s figure but exceeding official targets.
Digital currency markets saw bitcoin rise 0.4% to $71,247.25 while ethereum gained 0.2% to reach $2,170.88.
