Washington (awp/afp) – The dollar remains largely stable on Wednesday against other major currencies, losing some of its appeal as hopes rise for a de-escalation of tensions between Washington and Tehran.
At around 5:30pm GMT (7:30pm Paris time), the greenback was only down 0.05% against the euro, at $1.1799, and fell by 0.03% against the British pound, at $1.3571.
The American currency “continues to trade within narrow ranges, with markets hoping for a ceasefire and a resumption of negotiations” between the United States and Iran, explain Monex USA analysts.
Following the failure of discussions in Pakistan over the weekend, President Donald Trump stated on Tuesday that new talks could take place “within the next two days”.
He also suggested that the war with Iran was “almost over” in an interview on Fox News, claiming that Iranian authorities “really want to reach an agreement”.
“In just one week, the dollar has lost almost all the gains made in March, indicating that the risk premium related to the conflict is diminishing,” noted Kevin Ford of Convera.
The “buck” – one of the nicknames for the American currency – had notably benefited from its status as a safe haven amid geopolitical uncertainties.
It was also boosted by the surge in oil prices, which are denominated in dollars.
“Risk appetite is improving,” summarised Kevin Ford.
And the analyst believes that “an agreement to reopen the Strait of Hormuz” could push the greenback “above $1.20 for a euro.”
This strategic maritime passage, through which about one-fifth of the world’s oil and gas normally transits, has been practically paralyzed by Iran since the start of the war.
The blockage of this chokepoint has contributed to the surge in oil prices and consequently, to the appreciation of the dollar.
Currencies on Wednesday &CurrencyInWednesday; Currencies on Tuesday &CurrencyInTuesday;
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