The US dollar is on track on Tuesday to post its largest monthly gain since July, emerging as the strongest safe-haven asset amid the war in the Middle East, which has pushed oil prices higher while most other assets declined and increased the risk of a global recession.

Currencies of advanced economies were largely stable during Tuesday’s trading, with the Japanese yen holding at ¥159.62 per dollar, while the euro showed little change at $1.1472, and the British pound rose 0.14% to $1.3202. However, all three currencies are heading for losses of more than 2% in March. For the euro and the pound, this marks the largest monthly decline since July, while the yen is set for its biggest drop since October.

The dollar has been supported by the United States’ position as a major energy producer, in addition to investors’ shift over the past month toward holding cash as a safer option amid the conflict.

Recent developments in the war had limited impact on currency movements on Tuesday, although they reinforced broader monthly trends in the markets. A Wall Street Journal report said that US President Donald Trump is willing to halt attacks on Iran without forcing it to reopen the Strait of Hormuz. Lee Hardman, a senior currency analyst at MUFG, said that the lack of a clear plan to reopen the strait continues to pose an upside risk to global energy prices, adding that the likelihood of a larger hit to economic growth outside the United States continues to support the strength of the US dollar.

Asian currencies recorded some of the largest losses during this period. In Tuesday’s trading, the dollar rose 1% against the South Korean won to 1,534 won, a level previously seen only after the 2009 global financial crisis and during the Asian financial crisis of 1997–1998.

The dollar index, which measures the US currency against a basket of six major currencies, rose to its highest level since May at 100.64 points before stabilizing at 100.47 points, posting gains of about 2.8% since the start of March.

In foreign exchange markets, renewed threats of intervention by Japanese authorities to support the yen were among the key factors being monitored by investors. These warnings helped limit further selling pressure on the Japanese currency, which is currently trading near its weakest levels since July 2024. Japan’s Finance Minister Satsuki Katayama said on Tuesday that Tokyo is ready to act “on all fronts” to counter excessive market movements, noting that authorities are observing increased speculative activity in both currency and oil futures markets.

Since the outbreak of the war, the dollar has outperformed several assets traditionally considered safe havens. Rising inflation expectations have weighed on bond markets, while liquidation of positions has pressured gold, and the energy price shock has negatively affected Japan’s trade balance. At the same time, Swiss authorities have indicated that they may intervene to limit any sharp appreciation of the Swiss franc.

The dollar rose about 4% in March against the Swiss franc to around 0.80 francs, and also broke key resistance levels against the Australian and New Zealand dollars in recent sessions.

The Australian dollar declined for eight consecutive sessions, hitting a two-month low of $0.6834, down 3.7% in March, while breaking a key support level at $0.6897. The New Zealand dollar also fell for six straight sessions, approaching a break below the $0.57 level.

Analysts believe that the main risk facing the dollar could come from upcoming US labor market data, scheduled for release during the Good Friday holiday, which typically sees lower market liquidity. Strategists at Union Bancaire Privée also warned of a potential shift in the traditional relationship between currency and equity markets, where the dollar usually rises when stocks fall.

They noted that the relationship between currency and equity markets has remained relatively stable since the outbreak of the conflict, but could change if markets begin pricing in a longer-lasting conflict amid still-uncertain outcomes.

Meanwhile, eurozone inflation data for March is due later in the session, while German data released on Monday pointed to the possibility of inflation returning above the European Central Bank’s 2% target.

Gold prices rose in European trading on Tuesday, extending gains for the third consecutive day and hitting their highest level in two weeks, supported by a slowdown in the US dollar against a basket of currencies, following a report that Trump is seeking to exit the war with Iran.

Despite this rise, the precious metal is on track to record its largest monthly loss since October 2008, due to the repercussions of the Iran war, particularly rising oil prices and renewed concerns about global inflation.

Price Overview

Gold prices today: gold rose 2.4% to $4,619.15, the highest level in two weeks, up from the session opening level of $4,511.10, after hitting a low of $4,482.81.

At Monday’s settlement, gold rose 0.4%, marking its second consecutive daily gain, supported by a recovery from a four-month low of $4,098.23 per ounce.

US dollar

The dollar index fell 0.3% on Tuesday, retreating from a ten-month high of 100.64 points, reflecting a slowdown in the US currency against a basket of major and minor currencies.

Aside from profit-taking, the US dollar declined following reports that Trump is seeking to exit the war with Iran.

The Wall Street Journal reported late Monday that US President Donald Trump told his aides he is prepared to end military operations against Iran even if the Strait of Hormuz remains largely closed.

Trump said in a post on Truth Social that Washington is “holding serious talks” with Iranian officials, but added that if no agreement is reached soon, US forces will launch strikes on power plants, oil fields, and the strategic Kharg Island.

US interest rates

According to the CME FedWatch tool, markets are currently pricing a 97% probability that US interest rates will remain unchanged at the April meeting, while the probability of a 25-basis-point rate hike stands at 3%.

To reassess these expectations, traders are closely monitoring a series of key US labor market data releases.

Later today, US job openings data for the end of February will be released, followed on Wednesday by private sector employment data for March, on Thursday by weekly jobless claims, and on Friday by the nonfarm payrolls report for March.

Monthly performance

Over the course of March trading, which officially ends with today’s settlement, gold prices are up about 13% so far, yet are still on track to record their first monthly loss since July 2025 and the largest monthly loss since October 2008.

This sharp monthly loss is attributed to the repercussions of the Iran war and concerns over liquidity shortages in global markets.

The US dollar rose to a ten-month high against a basket of global currencies as investors focused on buying the US currency as a preferred safe-haven asset.

Global oil prices climbed to a four-year high due to supply disruptions from the Gulf region following the closure of the Strait of Hormuz by Iran’s Revolutionary Guard.

Rising energy prices have renewed concerns about accelerating global inflation, which may push central banks to raise interest rates to counter inflationary pressures.

SPDR fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, declined by 6.58 metric tons on Monday, bringing the total to 1,046.13 metric tons, the lowest level since November 26.

The euro rose in European trading on Tuesday against a basket of global currencies, as part of a recovery attempt from a two-week low against the US dollar, benefiting from a slowdown in the US currency following a report that Trump is seeking to exit the war with Iran.

Following more hawkish comments from the President of the European Central Bank last week, expectations for at least one interest rate hike this year have increased. To reassess those expectations, markets are awaiting the release of key inflation data in Europe later today for March.

Price Overview

Euro exchange rate today: the euro rose about 0.25% against the dollar to $1.1490, up from the session opening level of $1.1464, after hitting a low of $1.1447.

The euro ended Monday’s session down about 0.4% against the dollar, marking its fifth consecutive daily loss, and recording a two-week low of $1.1443, amid continued escalation of military confrontations in the Middle East.

US dollar

The dollar index fell 0.3% on Tuesday, retreating from a ten-month high of 100.64 points, reflecting a slowdown in the US currency against a basket of major and minor currencies.

Aside from profit-taking, the US dollar declined following a Wall Street Journal report stating that Trump told his aides he is ready to end the war against Iran even if the Strait of Hormuz remains closed.

European interest rates

ECB President Christine Lagarde said last week that the bank is ready to raise interest rates even if the expected rise in inflation is temporary.

Following those comments, money markets increased pricing for a 25-basis-point rate hike by the European Central Bank at the April meeting from 25% to 35%.

Sources told Reuters that the European Central Bank is likely to begin discussing interest rate hikes next month.

European inflation

To reassess expectations for interest rate changes this year, investors are awaiting the release of key inflation data in Europe later today for March, which will provide insight into the extent of inflationary pressures on policymakers at the European Central Bank.

The annual consumer price index in Europe is due at 09:00 GMT, with market expectations pointing to a 2.6% increase in March, up from 1.9% in February, while core inflation is expected to rise 2.4%, according to the previous reading.

Euro outlook

We expect that if inflation data comes in hotter than currently expected by markets, expectations for European interest rate hikes this year will increase, which would support further recovery in the euro against a basket of global currencies.

Monthly performance

Over the course of March trading, which officially ends with today’s settlement, the euro has declined about 2.75% against the US dollar so far, heading for a second consecutive monthly loss and its largest monthly decline since July 2025.

This monthly loss is attributed to investors focusing on buying the US dollar as a preferred safe-haven asset due to concerns related to the impact of the Iran war.

Rising oil and gas prices to multi-year highs are negatively affecting the European economy.

The Japanese yen fell in Asian trading on Tuesday against a basket of major and minor currencies, resuming losses that had briefly paused yesterday against the US dollar, and moving back toward its lowest levels in 20 months, under the watch of Japanese authorities who have issued strong warnings against excessive movements in the domestic currency in the foreign exchange market.

Data showed an unexpected slowdown in core inflation in Tokyo during March, in the latest sign of easing inflationary pressures on policymakers at the Bank of Japan, which has led to a decline in expectations for a Japanese interest rate hike in April.

Price Overview

Japanese yen exchange rate today: the US dollar rose 0.2% against the yen to ¥159.97, up from the session opening level of ¥159.67, after hitting a low of ¥159.59.

The yen ended Monday’s session up 0.35% against the dollar, marking its first gain in the past five days, after earlier hitting a 20-month low of ¥160.46.

Monthly performance

Over the course of March trading, which officially ends with today’s settlement, the Japanese yen has declined about 2.5% against the US dollar so far, heading for a second consecutive monthly loss and its largest monthly decline since last October.

This monthly loss is attributed to investors focusing on buying the US dollar as a preferred safe-haven asset amid concerns related to the impact of the Iran war.

Japanese authorities

In the strongest warning yet of potential intervention to support the yen, Japan’s top currency official Atsuki Mimura said on Monday that authorities may need to take decisive action if speculation in currency markets continues.

Mimura told reporters: we are hearing that speculation is increasing in currency markets, in addition to crude oil futures markets. If this situation continues, it may be time to take decisive action.

The 160 yen threshold

The US dollar rose against the yen on Friday, reaching ¥160 for the first time since July 2024, when Japanese authorities last intervened to support the currency.

Authorities in Tokyo have repeatedly warned of possible intervention to support the yen if its value declines excessively. The most recent intervention took place in July 2024, when the exchange rate reached around ¥161 per dollar, its lowest level since the 1980s.

Tokyo core inflation

Data released today in Japan showed that Tokyo core consumer prices rose 1.7% in March, below market expectations of a 1.8% increase, after rising 1.8% in February.

Lower-than-expected price readings in Japan signal easing inflationary pressures on policymakers at the central bank, reducing the likelihood of interest rate increases this year.

Japanese interest rates

Following the data, markets reduced pricing for the probability of a quarter-point rate hike by the Bank of Japan at the April meeting from 25% to 15%.

To reassess these expectations, investors are awaiting further data on inflation, unemployment, and wages in Japan.