Dollar Strengthens on US-Iran Uncertainty

The US dollar index climbed to around 98 on Monday, recovering part of last week’s losses as the US and Iran struggled to find a diplomatic solution to end the 10-week conflict, supporting demand for the safe-haven currency. President Donald Trump dismissed Iran’s response to his peace proposal as “TOTALLY UNACCEPTABLE,” as Tehran reportedly offered transferring part of its highly enriched uranium stockpile to a third country while refusing to dismantle its nuclear infrastructure. On the economic side, data released Friday showed US nonfarm payrolls rose by 115,000 in April, significantly above expectations for a 62,000 increase, reinforcing market views that the Federal Reserve is likely to keep interest rates unchanged this year. Investors are now focused on upcoming US inflation data for April, which will offer further insight into how rising oil prices are filtering through to broader price pressures in the economy.

The dollar index fell below 98 on Friday, reaching its lowest level in ten weeks, despite stronger-than-expected US labor data that reinforced views the economy remains resilient amid the energy shock caused by the Iran conflict. US nonfarm payrolls increased by 115,000 in April, well above expectations for a 62,000 rise, marking a second consecutive monthly gain for the first time in nearly a year. The unemployment rate held steady at 4.3%. Markets are now weighing solid economic data against expectations that the Federal Reserve will remain cautious as higher energy prices continue to fuel inflation risks. President Donald Trump said the month-long ceasefire with Iran was still holding despite renewed clashes involving US and Iranian forces. Investors remain focused on the Strait of Hormuz, which has been largely closed since the war began, while Tehran has yet to respond to Washington’s proposal to reopen the key trade route.

The dollar index edged slightly lower to below 98 on Friday, hovering around pre-war levels, as traders continued to assess developments in the Middle East. Uncertainty persists over how quickly the US and Iran can reach an agreement to end the conflict, after US forces struck missile and drone launch sites and other military assets in Iran that Washington said were linked to attacks on three US warships transiting the Strait of Hormuz. Still, President Trump said the ceasefire remains in effect. Meanwhile, investors are also awaiting today’s jobs report for fresh signals on the health of the labor market. The Federal Reserve is widely expected to keep interest rates unchanged through the remainder of the year. The greenback was mostly stronger against the pound after local election results reinforced expectations of significant losses for the Labour Party. On the week, the dollar index was little changed.