Ceasefire Sends Dollar Toward Weekly Drop
Why it matters: The dollar index dipped 0.24%, falling 1.6% this week, as a ceasefire unwinds its safe-haven appeal.
- The dollar is set for a weekly drop of 1.6%, reversing its March gains as a safe haven during the U.S.-Iran conflict.
- The euro has rallied 1.8% this week to $1.17255, while sterling gained 2% to $1.346, reflecting the unwinding of safe-haven positions.
- Risk-sensitive currencies like the Australian and New Zealand dollars are poised for nearly 3% weekly rises against the dollar, with the Aussie trading above 70 cents.
- Marc Chandler, chief market strategist at Bannockburn Global Forex, notes that the market remains generally optimistic despite the ceasefire's fragility.
- Jason Wong, senior strategist at BNZ, explains that investors are selling the dollar as the "tail risk of a really bad outcome has faded," but warns that sentiment could shift rapidly if weekend peace talks fail.
- U.S. consumer prices rose by the most in nearly four years in March, largely due to the war boosting oil prices and persistent tariffs, according to Friday's data.
- The yen rose slightly against the dollar but was sold against other currencies, slipping to 159.75 per dollar on Friday.
- China's yuan is set for its biggest weekly rise in 15 months, trading at its strongest levels since 2023, despite China being the largest oil importer, with ING economist Lynn Song calling it a "surprising winner."
- Factory gate prices in China rose for the first time in three years, signaling potential inflation after a prolonged period of deflation.
The dollar is facing a weekly decline as a fragile ceasefire between the U.S. and Iran unwinds its previous safe-haven gains, with investors now focused on weekend peace talks in Islamabad. While markets remain optimistic despite the ceasefire's shakiness, analysts warn that positive talks would further weaken the dollar, while a failure could quickly reverse current market sentiment.
