The US dollar index fell 0.3% to 98.32 on Monday. The small drop came amid reports of a new peace proposal from Iran, delivered through a Pakistani intermediary. While the news gave the market some hope, investors remained cautious given the failure of similar talks two weeks ago.
The main focus of the market this week has shifted to a series of global central bank meetings, including the Federal Reserve (Fed) and the Bank of Japan (BOJ). The Fed is expected to keep interest rates unchanged, but analysts expect a more hawkish statement on the need to keep rates high for a longer period to curb inflation driven by rising oil prices.
In Japan, the Yen was trading at 159.17 against the US dollar, nearing the 160 trading level. Tokyo authorities are on alert to intervene in the market to support the Yen if the currency continues to decline. The BOJ is expected to keep interest rates on hold at its meeting on Tuesday. At the same time, it expressed its readiness to raise rates as early as June if geopolitical conditions stabilize.
The euro strengthened slightly to $1.1741. While Europe is highly vulnerable to rising energy prices due to its high dependence on oil imports, hopes of the reopening of the Strait of Hormuz provided some support for the single currency. Analysts are watching Brent crude oil prices, currently at $106.40 a barrel, as a key indicator of the euro's movement.
Overall, the currency market is in a "wait and see" phase. Any negative developments in the US-Iran talks or a dovish signal from BOJ Governor Kazuo Ueda could trigger significant volatility. Investors are now assessing whether Iran's latest offer to postpone the nuclear issue will be accepted by Washington to allow world oil trade to return to normal.
