The dollar climbed yesterday after peace talks between the US and Iran broke down and as the US Navy prepared to blockade Iranian ports, while the Hungarian forint rallied after the center-right Tisza party defeated Viktor Orban in a landslide election victory.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.16 per cent to 98.88, with the euro down 0.18pc at $1.1698.
The greenback is coming off its biggest weekly percentage drop since mid-January. “The market went into the weekend optimistic, the dollar finished near its lows, so the short-term market was leaning the wrong way,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York.
“Given that we could be on the verge of a major escalation, I’d say the market is showing a lot of restraint.” The risk-sensitive Australian dollar weakened 0.21pc versus the dollar to $0.7045 and the New Zealand dollar edged down 0.09pc versus the greenback to $0.5827.
The war in the Middle East has pushed crude prices up about 40pc since the end of February, when the war began, heightening concerns about higher inflation and lower global growth, also known as stagflation.
The dollar has tended to gain when tensions between Iran and the US have risen, given its status as a safe haven and the relative insulation of the US to imported energy-price inflation. Against the Norwegian krone,, the dollar weakened 0.47pc to 9.488 and the Canadian dollar strengthened 0.01pc versus the greenback to C$1.383 per dollar, with both currencies sensitive to movements in crude prices.
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