The dollar maintained its position on Monday, while the yen approached the significant 160 per dollar threshold, as anxious investors assessed the intensifying conflict in Iran, with attention focused on the recent ultimatum from U.S. President Donald Trump regarding the reopening of the Strait of Hormuz. In a strongly worded Easter Sunday social media post, Trump indicated that he would take action against Iran’s power plants and bridges on Tuesday if the strategic waterway remains closed, establishing a clear deadline of 8 pm. As Asia and Europe observe a holiday on Monday, we can expect liquidity to be limited. Investors will likely concentrate on the potential for a ceasefire, following a media report indicating that negotiators are making a final effort. “Trump’s latest deadline is bearish not due to investors believing that war is imminent if Iran does not open the strait, but rather because each new ultimatum makes the disruption appear longer, stickier, and more macro-negative,” stated Charu Chanana. The euro stood at $1.1523, whereas sterling was last recorded at $1.3211. The dollar index, which gauges the U.S. currency relative to six competitors, registered a modest decline at 100.12. The Australian dollar experienced a 0.3% increase, reaching $0.69045, while fluctuating close to the two-month low established last week.

In a display of mixed messaging that has left supporters, opponents, and financial markets perplexed, Trump stated on Sunday that Iran was in negotiations, suggesting a deal could be reached by Monday. Axios has indicated that discussions are underway among the U.S., Iran, and regional mediators regarding the terms of a potential 45-day ceasefire, which may pave the way for a permanent resolution to the conflict. Global markets have experienced significant turbulence since the onset of the U.S.-Israel conflict with Iran at the end of February. Tehran has effectively shut down the Strait of Hormuz, a crucial waterway responsible for the transit of approximately one-fifth of the world’s total oil and liquefied natural gas. “If the strait is reopened fully around that time (Trump’s Tuesday deadline), oil will fall sharply and risk will rally hard,” said Prashant Newnaha. However, should the U.S. escalate, anticipate a significant repricing in global markets. It’s a matter of observation in what is shaping up to be a binary event.

The recent closure has led to a significant increase in oil prices, surpassing $100 per barrel, raising concerns about inflation and disrupting global interest rate projections. Concerns regarding the impact on economic growth have also been a factor as stagflation risks circulate. Market participants have adjusted their expectations, no longer anticipating a shift from the Federal Reserve extending into the latter part of 2027, in contrast to earlier predictions of two rate cuts occurring in 2026 at the beginning of the year. Recent data indicated that U.S. labor market conditions were stable in March; however, economists cautioned that an extended conflict in the Middle East could present potential risks to this stability. The Japanese yen remained steady at 159.55 per U.S. dollar, close to the 21-month low reached last week, as traders monitor potential signs of intervention from Tokyo following recent strong warnings from officials.

On Friday, Japanese Finance Minister Satsuki Katayama alerted currency traders, indicating that the government is prepared to intervene against speculative activities in foreign exchange markets due to a “significantly” increased volatility. Nonetheless, there remains skepticism regarding the effectiveness of any intervention, particularly during a period when geopolitical instability in the Middle East is driving persistent demand for the safe-haven dollar. The yen has depreciated by 1.5% since the onset of the conflict, remaining around the 160 mark. Speculators have been increasing their short yen positions, with the most recent weekly data indicating a short position valued at $5.7 billion, the highest level since July 2024, when Japan last intervened in the foreign exchange markets.