The dollar held close to its highest level in a week on Tuesday as traders parsed contradictory signals from the Middle East: fresh fears over energy supply on one side, and renewed diplomatic hopes on the other.
The dollar index, which measures the currency against a basket of six peers, was steady at 100.96, near its strongest level since July 15. Against the Japanese yen, the dollar was largely unchanged at 162.50. The euro was little moved at 1.1415 dollars, while sterling held at 1.3434 after newly appointed UK prime minister Andy Burnham committed to maintaining fiscal rules.
“There is hope that tensions will ease a little, but the situation remains very volatile,” said Rodrigo Catril, senior currency strategist at National Australia Bank. “We need to wait and see how things develop. We need to know whether things will escalate or not.”
US Treasury yields rose again as traders weighed whether oil’s advance, driven by the widening conflict with Iran, will eventually feed through to consumer prices. The benchmark 10-year yield traded at 4.5937 per cent, while 30-year yields remained well above the five per cent threshold.
Elsewhere, the New Zealand dollar gained 0.4 per cent to 0.5860 against the US dollar, its highest since early June, after strong inflation data firmed expectations of another rate rise. The Australian dollar edged up to 0.7001 dollars.
A European Central Bank survey released Monday showed eurozone companies expect a more moderate rise in selling prices. The ECB is widely expected to hold rates at its meeting this week, though rising oil prices are stoking speculation of a further increase to the 2.25 per cent deposit rate in September.
The Canadian dollar stabilised after falling to a one-month low, following the United States imposing new 50 per cent tariffs on a broad range of Canadian goods in response to what Washington described as discriminatory treatment by Ottawa.
