Financial markets remained on edge Tuesday as the US dollar held near recent peaks while traders awaited a critical deadline set by President Trump regarding Iran’s control of Persian Gulf shipping routes.
The American currency has strengthened significantly as ongoing Middle East conflicts and Iran’s ability to block the crucial Strait of Hormuz shipping lane have sent energy costs climbing and prompted investors to seek refuge in dollar-denominated assets, particularly across Asian markets.
While Easter holiday optimism about potential diplomatic progress temporarily slowed additional dollar purchases, financial markets showed clear nervousness with minimal dollar selling activity ahead of President Trump’s 8 p.m. Eastern deadline.
Currency exchange rates reflected the tension, with the Japanese yen trading at 159.67 against the dollar, approaching multi-decade lows similar to levels that triggered government intervention in 2024. The euro was valued at $1.1539 while the British pound stood at $1.3235, both slightly recovering from multi-month lows reached in late March.
“(The) market (is) long USD in case of further escalation, but stocks, gold and CNH trade well and put a lid on dollar gains,” explained Brent Donnelly, president at Spectra Markets.
“It’s hard to make any high-confidence predictions here … we wait for 8 p.m. and see what type of attacks Iran and U.S./Israel launch in the meantime,” Donnelly added.
During Monday remarks, Trump indicated Iran could be “taken out” in one night “and that night might be tomorrow night.” The president promised to target Iranian power facilities and infrastructure, dismissing concerns about potential war crimes or alienating Iranian citizens.
Iranian leadership has refused ceasefire proposals, demanding a complete end to hostilities. Recent developments include Israeli claims of responsibility for killing an Iranian intelligence official and striking a southern Iranian petrochemical facility.
The Australian and New Zealand currencies, which dropped sharply when Iranian attacks on regional energy infrastructure escalated in late March, showed modest recovery to $0.6917 and $0.5714 respectively, though trading remained cautious.
South Korea’s won continued struggling below the 1,500 level, a threshold previously reached only during the 2009 financial crisis and late 1990s economic turmoil. Indonesia’s rupiah hit record lows Monday, while China’s yuan remained stable in international trading.
“The dollar may ease modestly further in the near term because of optimism the U.S. will ‘end’ the Iran war,” Commonwealth Bank of Australia analysts noted.
“However, there are three participants in the war: the U.S., Israel and Iran. What matters for the world economy and currencies is whether the Strait of Hormuz is open. The U.S. leaving the conflict does not re-open the Strait,” the analysts concluded.
