Forex News: Dollar Plunges As US-Iran Ceasefire Halts Haven Bids

Dollar Plunges As US-Iran Ceasefire Halts Haven Bids

(RTTNews) - The U.S. dollar plunged against major currencies during the week ended April 10 as a ceasefire between the U.S. and Iran limited safe haven buying.

As hopes of an end to hostilities lured investors back to risky assets, the U.S. dollar inter alia declined against the euro, the British pound, the Australian dollar, the Japanese yen, the Canadian dollar, the Swedish krona as well as the Swiss franc. As a result, the Dollar Index which measures the Dollar's strength against a basket of 6 currencies also dropped more than one and a half percent.

During the past week, the Dollar Index traded between the weekly high of 100.29 recorded on Monday and the weekly low of 98.53 recorded on Wednesday. With the dramatic de-escalation in the Middle East conflict, the dollar index eventually closed the week's trading at 98.65, implying a decline of 1.57 percent from the level of 100.22 on April 3.

Currency markets also digested the Fed's outlook on inflation and the labor market contained in the minutes of the Federal Open Markets Committee released on Wednesday. According to the document, several participants felt that measures of near-term inflation expectations had risen in recent weeks, reflecting the substantial rise in oil prices caused by events in the Middle East.

Participants also expected that higher oil prices would increase inflation in the near term and delay the anticipated decline in inflation toward the Committee's 2 percent objective. The participants also judged that the recent readings like job openings, layoffs, hiring, and nominal wage growth, continued to suggest that the labor market was broadly in balance and that the low rate of job growth was roughly in line with slower labor force growth.

Several key economic data updates released during the week also swayed currency market sentiment. Data released on Thursday showed the U.S. economy expanding at an annualized rate of 0.5 percent in the fourth quarter, revised down further from 0.7 percent in the second estimate and 1.4 percent in the preliminary reading.

According to data released on Thursday, the core PCE price index, the Federal Reserve's preferred gauge of underlying inflation, rose by 0.4 percent in February in line with the market consensus.

Data released by the U.S. Bureau of Labor Statistics on Friday morning showed headline inflation readings in line with estimates. Annual headline inflation increased to 3.3 percent from 2.4 percent in tandem with the forecasts. Headline inflation on a month-on-month basis jumped to 0.9 percent from 0.3 percent, exactly as the markets had expected.

Core consumer prices in the United States, which exclude food and energy prices increased by 2.6 percent on a year-on-year basis. Markets had expected it to rise to 2.7 percent from 2.5 percent in February. Likewise, on a month-on-month basis, core inflation remained steady at 0.2 percent, whereas markets had expected it to rise to 0.3 percent.

Amidst the dollar's plunge attributed to the geopolitical relief, the EUR/USD pair jumped 1.76 percent during the week ended April 10. From the weekly low of 1.1505 touched on Monday, the pair climbed to a high of 1.1740 on Friday. The pair eventually closed the week at 1.1720, versus 1.1517 a week earlier.

The British pound also surged against the greenback during the week ended April 10. The GBP/USD pair which had closed at 1.3194 on April 3 rallied more than 2 percent during the week ended April 10 to close trading at 1.3462. The weekly trading range was wider between a low of 1.3177 recorded on Monday and a high of 1.3486 on Wednesday.

The Australian Dollar jumped 2.5 percent against the U.S. Dollar during the past week. The AUD/USD pair surged from the level of 0.6891 recorded on April 3 to close the week ended April 10 at 0.7062. During the week, the pair oscillated between a low of 0.6876 recorded on Monday and the high of 0.7096 recorded on Thursday.

The U.S. Dollar declined marginally against the Japanese Yen also during the week ended April 10. The USD/JPY pair closed the week at 159.30 versus 159.59 a week earlier, registering a decline of 0.18 percent. The pair oscillated heavily during the week, recording the week's high of 160.04 on Tuesday and the week's low of 157.88 on Wednesday.

With no meaningful progress achieved in the U.S.-Iran peace talks over the weekend, the Dollar Index has rebounded. The Dollar Index is currently at 98.78 versus 98.65 on Friday.

The EUR/USD pair is currently at 1.1706 versus 1.1720 on Friday. The GBP/USD pair is currently trading near 1.3453 versus 1.3462 on Friday. The AUD/USD pair is currently at 0.7060. The pair had closed at 0.7062 on Friday.

With the Japanese yen weakening, the USD/JPY pair is now at 159.56 as compared with the level of 159.30 recorded at the end of the previous week.

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