As stalled peace talks between the United States and Iran dimmed prospects for an immediate easing of Middle East tensions, the dollar was on course for its first weekly rise in three weeks on Friday. Iran demonstrated its control over the Strait of Hormuz by releasing footage of its commandos storming a massive cargo ship, leaving the timing of the reopening of the world’s most significant shipping corridor uncertain and keeping oil prices high while Lebanon and Israel extended their ceasefire for three weeks ahead of its expiration on Sunday. The dollar index, which compares the US dollar to a basket of currencies that includes the yen and the euro, hardly moved at 98.82 and stayed on course for a 0.58% weekly gain. Sterling fell 0.02% to $1.3464, while the euro remained unchanged at $1.1683. Crude is gradually rising again, and the currency and oil continue to move fairly closely together. Sho Suzuki stated, “I would say the dollar is still staying fairly firm.” At 0107, West Texas Intermediate futures were up $1.07, or 1.12%, at $96.92, while Brent crude futures increased $1.23, or 1.17%, to $106.30 per barrel.

In the midst of the uncertainty, the dollar has attracted demand for safe havens. It gained ground in March as worries about the violence mounted, but this month it lost part of those gains as hope for a possible settlement increased. In the meantime, the yen fell 0.03% to 159.77 per dollar, on course for a fifth day in a row of losses. A day after stating that Japan has a “free hand” to intervene and that previous interventions had been successful, Japanese Finance Minister Satsuki Katayama reiterated her verbal warning on intervention on Friday, stating that authorities can take “decisive” action against speculative moves in the foreign exchange market. Akihiko Yokoo stated in a note that “it is difficult to expect a scenario in which the yen weakens sharply ⁠beyond 160 per dollar in the near term,” given the Japanese government’s ongoing efforts to combat currency weakening. For the second consecutive month in March, core consumer inflation in Japan declined below the central bank’s 2% objective.

However, analysts predict that in the upcoming months, as businesses start to pass on higher fuel prices due to the Middle East crisis, inflation will speed back above the Bank of Japan’s objective. The BOJ’s two-day policy meeting is scheduled to conclude on Tuesday. According to source, the bank is probably not going to raise interest rates next week because the country’s economic and pricing outlook is still quite uncertain due to dwindling chances of an immediate end to the Middle East conflict. In order to combat growing pricing pressure, the BOJ is still anticipated to indicate that it is prepared to increase. Only if the dollar-yen pair breaks above its April 2024 high of 161.95 is an intervention more plausible, according to Suzuki of Matsui Securities. Therefore, even if yen weakness picks up speed following the BOJ meeting next week, they will likely begin with jawboning and, if that fails, proceed to real action,” he stated.

Similarly, slightly more than half of economists believe that the European Central Bank would maintain its deposit rate on April 30 but raise it in June in an effort to prevent a war-related energy shock from upsetting the equilibrium of the euro zone economy. At $0.7131, the Australian dollar gained 0.04% against the US dollar. The value of the New Zealand kiwi increased 0.07% against the US dollar to $0.5856. The Philippine peso dropped 0.29% to 60.70 per dollar, the Malaysian ringgit weakened 0.17% to 3.97, and the Indian rupee fell 0.07% to 94.11, but the dollar remained strong against developing Asian currencies. Bitcoin increased 0.64% to $78,420.18, while Ethereum increased 0.16% to $2,330.16.