DXY Falls for 6th Session

The dollar index slipped to around 98.3 on Monday as investors shifted toward riskier assets, driven by optimism that a deal between the US and Iran could eventually be reached. Although the US failed to secure an agreement with Iran over the weekend, leading President Trump to announce a blockade targeting Iranian oil shipments, he later indicated that Iran had made contact and is now looking to resume negotiations.

The dollar index climbed back to around 99 on Monday, recovering part of last week’s losses after President Donald Trump announced a blockade of the Strait of Hormuz following the failure of weekend peace talks between the US and Iran. Vice President JD Vance left Islamabad without securing an agreement with Iranian counterparts, citing their refusal to halt efforts to develop nuclear weapons, while Tehran reportedly demanded control of the Strait of Hormuz, war reparations, and the release of frozen assets. The effective closure of the critical shipping lane has driven energy prices sharply higher and heightened inflation risks, reinforcing expectations that the Federal Reserve may delay interest rate cuts or even consider rate hikes. These developments have supported the dollar, which also emerged as the strongest-performing safe-haven asset amid the ongoing crisis.

The dollar index remained below 99 on Friday, as investors continued to monitor developments in the Middle East and assess the latest US CPI report. US and Iranian delegations are set to meet in Pakistan on Saturday, while Israel has agreed to hold talks with Lebanon’s government, raising hopes of de-escalation in the region. However, the Strait of Hormuz remains largely closed, keeping oil prices elevated. The impact of the war with Iran is already being reflected in US inflation data. Consumer prices rose 0.9% in March, the largest monthly increase since June 2022, pushing the annual rate to 3.3%, the highest since May 2024 and in line with expectations. Core CPI, however, rose more modestly to 2.6% from 2.5%, suggesting that the full impact of the oil shock has yet to pass through to underlying inflation. Investors currently see little chance of another interest-rate cut by the Fed in 2026 and many economists are maintaining forecasts for one or more reductions later in the year.