Dollar maintains gains as Trump's Iran deadline approaches

The dollar maintained its proximity to its recent highs on Tuesday, while traders await a deadline imposed by the United States on Iran to reopen the Strait of Hormuz to shipping traffic, or face attacks on its infrastructure.

The war in the Middle East and the closure of the vital maritime corridor in the Gulf led to a sharp rise in energy prices, which pushed investors toward the dollar as the most effective safe haven, a matter that strengthened the power of the American currency, especially in Asian markets.

Even though hopes of reaching an agreement or achieving a diplomatic breakthrough limited dollar purchase operations during the Easter holiday, markets remained tense, with a lack of sellers for the American currency ahead of the deadline set by the American President Donald Trump at eight in the evening US Eastern Time.

The Japanese yen fell to 159.80 against the dollar, close to its lowest levels in decades, which are levels that pushed Japanese authorities to intervene in the market in the year 2024.

Brent Donnelly, president of Spectra Markets, said: "The market is holding long positions on the dollar in anticipation of more escalation, but the performance of stocks, gold, and the offshore yuan limits the gains of the American currency." He added: "It is difficult to provide high-confidence forecasts in such a situation... we will wait until eight in the evening to see the nature of the attacks that Iran or the United States and Israel may launch in the meantime."

Trump had stated on Monday that Iran could be "wiped out in one night," adding that that night "might be tomorrow night." He also pledged to destroy Iranian power plants and bridges, rejecting fears that this would be considered a war crime or that it would lead to the alienation of the Iranian people.

The US dollar index rose by a slight percentage amounting to 0.05% to 100.03, after it recorded last week 100.64, which is its highest level since May 2025.

Thu Lan Nguyen, head of FX and commodity research at Commerzbank, said:

"The Iranian leadership showed, surprisingly to many, its ability to exercise complete control over the Strait of Hormuz," adding that "it is already clear that Iran intends to use this control to serve its long-term interests."

Iran and Israel exchanged attacks on Tuesday at a time when Tehran refuses to reopen the strait. Israel said that it carried out a wave of air strikes targeting Iranian government infrastructure, while defenses intercepted Iranian missiles over Israel and Saudi Arabia.

The euro stabilized almost at $1.1535, while markets price three increases in interest rates by the European Central Bank by the end of the year, in light of the confirmation of the bank's officials of their readiness to act to confront inflation.

Dimitar Radev, a member of the European Central Bank, warned that inflation expectations in the eurozone may rise at a faster pace than they were previously, which necessitates the bank's readiness to raise interest rates quickly if sustained price pressures appear.

As for the Australian and New Zealand dollars, which fell sharply with the escalation of fighting and Iranian attacks on energy infrastructure in the Middle East in late March, they recovered from their lowest levels but remained weak at $0.6912 and $0.57 respectively.

The South Korean won is still trading above the 1500 level against the dollar, which is a level that was not recorded previously except during crises such as the global financial crisis in 2009 and the crisis of the late nineties. Also, the Indonesian rupiah dropped to a record low level, while the Chinese yuan maintained its relative stability that it witnessed in March.

Analysts at Commonwealth Bank of Australia said that the dollar may fall slightly in the short term due to optimism that the United States may end the war with Iran. But they added:

"There are three parties in the war: the United States, Israel, and Iran. What matters to the global economy and currency markets is whether the Strait of Hormuz is open or not. The exit of the United States from the conflict does not mean the reopening of the strait."