The US Dollar Index (DXY), which tracks the US dollar against six major currencies, stayed in positive territory after giving up some gains. It traded near 99.00 during Asian hours on Monday.<\/p>\n
The US dollar rose as demand increased for safe-haven assets after US\u2013Iran peace talks ended without an agreement. US Vice President JD Vance said the talks in Islamabad finished with no deal after 21 hours of negotiations.<\/p>\n
US President Donald Trump said the US would start blockading ships entering or leaving the Strait of Hormuz. US Central Command said operations targeting maritime traffic to and from Iranian ports would begin at 10 AM ET (14:00 GMT) on Monday.<\/p>\n
The dollar also found support after March US Consumer Price Index (CPI) data supported the Federal Reserve\u2019s higher-for-longer approach. The US Bureau of Labor Statistics reported annual CPI at 3.3% in March, up from 2.4% in February, and in line with expectations.<\/p>\n
Monthly CPI rose 0.9% after 0.3% previously. Core CPI increased 0.2% month-on-month and 2.6% year-on-year.<\/p>\n
San Francisco Fed President Mary Daly said the Fed would keep rates steady if inflation stays elevated. She said a rate cut could happen if the Iran conflict eases quickly and oil prices fall.<\/p>\n
With the US Dollar Index firming around 99.00, we should expect continued strength in the Greenback. The breakdown of US-Iran talks is a significant risk-off event that increases safe-haven demand for the dollar. This geopolitical tension is now the market’s primary focus.<\/p>\n
The blockade of the Strait of Hormuz will almost certainly cause a spike in oil prices and overall market volatility. We saw a similar situation back in 2019 when attacks in the Gulf of Oman caused Brent crude prices to jump over 4% in a single day. Derivative traders should consider positions that benefit from higher energy prices and a rising VIX, which historically has surged above 30 during major geopolitical conflicts.<\/p>\n
The high US inflation data further supports a strong dollar by keeping the Federal Reserve on hold. The 3.3% CPI reading makes near-term rate cuts highly unlikely, a lesson we learned well during the inflationary period of 2022-2023 when the Fed hiked rates to over 5%. This reinforces the “higher-for-longer” narrative, making it prudent to trade against dovish Fed expectations in the interest rate futures market.<\/p>\n
Given these dual tailwinds of geopolitical risk and hawkish Fed policy, we can expect the DXY to climb higher. While 99.00 is a strong level, it is well below the peaks of over 114 that we saw in late 2022 during the height of the Fed’s last tightening cycle. This suggests there is still significant room for the dollar to appreciate against currencies like the Euro and the Yen.<\/p>\n
This environment is particularly negative for emerging markets, which suffer from a strong dollar and investor risk aversion. We should anticipate capital flight from these regions, putting downward pressure on their currencies and stock indices. Put options on major emerging market ETFs could offer a way to hedge or speculate on this expected downturn.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Dollar Index holds near 99.00 as Iran tensions, Hormuz blockade threat, and hotter CPI fuel safe-haven demand.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-44727","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/44727","targetHints":{"allow":["GET","POST","PUT","PATCH","DELETE"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=44727"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/44727\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=44727"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=44727"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=44727"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}