Currency markets showed limited movement as traders monitored the status of the ceasefire between the U.S. and Iran following its announcement earlier in the week. The U.S. dollar weakened initially, recording its largest weekly decline since the conflict began in late February.
The situation remains uncertain, with continued military activity in Lebanon and no indication that Iran has lifted its blockade of the Strait of Hormuz, which continues to affect global energy supply. Iranian negotiators are expected to travel to Pakistan for talks, although Tehran stated there would be no agreement while strikes in Lebanon continue. Israeli Prime Minister Benjamin Netanyahu indicated an interest in direct talks with Beirut. U.S. President Donald Trump stated that U.S. military presence would remain in place until compliance with the agreement is confirmed.
The euro increased by 0.3 per cent to US$1.1698 after rising 0.6 per cent the previous day, while sterling rose 0.27 per cent to US$1.343 after earlier gains. The Japanese yen weakened, with the dollar rising 0.27 per cent to 159.02 yen after briefly dropping below 158.
Derek Halpenny, head of research, global markets EMEA at MUFG, said: "With the Strait of Hormuz closed, "the entire ceasefire remains tenuous," but added, "while the U.S. dollar has rebounded, the moves in general have been modest." He noted that planned talks in Pakistan were limiting further currency adjustments.
Economic data from the U.S. indicated that inflation increased in February, with expectations of further increases in March linked to the conflict. The Personal Consumption Expenditures price index rose by 0.4 per cent following a 0.3 per cent increase in January, according to the Commerce Department.
In Japan, consumer confidence declined in March for the first time in three months, reflecting potential economic effects linked to the Middle East situation. Bank of Japan Governor Kazuo Ueda stated that real interest rates remain negative and continue to support accommodative financial conditions.
Other currencies also moved higher, with the Australian dollar increasing by 0.49 per cent to US$0.7078 and the New Zealand dollar rising 0.57 per cent to US$0.5855. Bitcoin was reported at US$71,942, up 0.79 per cent.
Source: Global Banking & Finance Review
