Dollar Strengthens Amid US-Iran Tensions, Risk Appetite Remains Subdued
US Dollar Rises Against Euro Amid Middle East Tensions
The US dollar strengthened against the euro on Monday, May 4, as investors remained cautious due to ongoing tensions in the Middle East. The dollar index, which measures the US currency's strength against a basket of currencies, rose 0.2% to 98.404.
The index has been supported by the lack of a resolution to the Middle East conflict, which has been a major driver of market sentiment. The conflict has kept investors on edge, and the dollar has benefited from the uncertainty.
| Currency Pair | Change |
|---|---|
| USD/EUR | +0.2% |
| USD/JPY | -0.06% |
| USD/GBP | -0.3% |
| USD/AUD | -0.4% |
Markets remained cautious on Monday after Iranian news agency Fars reported that two missiles had hit a US warship near Jask on the Gulf of Oman. However, the US Central Command denied the reports, and the US military stated that two US Navy guided-missile destroyers had entered the Gulf to break an Iranian blockade.
The euro was down 0.2% at $1.1694, despite German Chancellor Friedrich Merz's efforts to downplay a rift with Trump over the US plan to draw down troops from Germany. The country's economy ministry said on Sunday that Berlin is in touch with the European Commission as it holds talks with Washington.
The dollar was 0.06% lower against the yen after the Japanese currency climbed by as much as 0.75% to 155.69 earlier in the session. Traders remain on alert for action by authorities following suspected intervention by them last week to bolster the battered currency.
The British pound was down 0.3% at $1.35365, while the Australian dollar was down 0.4% at $0.7174. The Reserve Bank of Australia is due to announce its next policy decision on Tuesday, with the majority of analysts polled by Reuters expecting a hike in the cash rate to 4.35%.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Bitcoin was 1.4% higher at $80,046, trading above $80,000 for the first time since January 31.
Investor Takeaway
Investors should remain cautious due to ongoing tensions in the Middle East.
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