Wavering hopes of a deal to end the Middle East war left investors on edge in a week when they will also be looking for direction from central bank policymakers on the impact of the conflict, leaving the U.S. dollar wobbly on Monday.
- +Dollar Unstable As Traders Assess Stumbling US-Iran Talks
Brent crude futures were up 1% at $107.20 a barrel and U.S.
Brent crude futures were up 1% at $107.20 a barrel and U.S. West Texas Intermediate at $95.80 a barrel, up 1.5%.
The war has sent oil prices surging, fuelled inflation, and cast a shadow over the outlook for global growth, with the closure of the strait, which normally carries a fifth of global oil and gas shipments, a key risk.
The dollar index, which measures the U.S. currency against six major peers, was at 98.465, down 0.18%.
The dollar benefited in March from safe-haven flows as the war erupted, but shed most of those gains on hopes of a peace deal this month. It has steadied in recent days after U.S.–Iran talks stalled.
The euro cut earlier losses to trade flat at $1.1726, while sterling bought $1.3544, also pulling back a bit.
U.S. President Donald Trump scrapped a visit to Islamabad by his envoys over the weekend, saying Iran could reach out if it wanted to negotiate an end to the two-month war, leaving the pivotal Strait of Hormuz effectively closed.
But sentiment got a lift after Axios reported, citing sources, that Iran offered the U.S. a new proposal through Pakistani mediators on reopening the waterway and ending the war, with nuclear negotiations postponed for a later stage.
Investors will be watching several central bank meetings this week to gauge the impact of the war on prices and rate outlooks, with the Bank of Japan expected to keep rates steady on Tuesday but signal its readiness to hike as soon as June.
Unlike last year when higher U.S. tariffs forced a pause in its rate-hike cycle, the Bank of Japan will stress its resolve to keep raising rates as the energy shock risks fuelling broad-based inflation, sources familiar with its thinking told Reuters.
The Japanese yen was steady at 159.26 per U.S. dollar, just shy of the crucial 160 level that traders worry could prompt Tokyo to intervene in the currency markets.
The yen has been stuck in the 159 range since early March as investors assess the impact of the oil shock on energy-import-dependent Japan and the BOJ’s tightening trajectory.
