THE dollar softened yesterday as signs emerged of possible peace talks between the US and Iran, but headed for its first weekly gain in close to a month as investors remained nervous over the situation in the Middle East.
The dollar had been trading around flat in early trading but later in the European session it softened more and was last down 0.23 per cent at $98.595.
The euro was 0.3pc higher at $1.1172.
Sterling edged 0.2pc higher, with stronger-than-expected UK retail sales for March barely moving the needle.
“If you look at the last week the major theme is just that there’s no real progression with peace talks. For markets, it’s difficult when there’s no deadline,” Tommy Von Brömsen, FX strategist at Handelsbanken in Stockholm, said.
The dollar has drawn safe-haven demand amid the uncertainty. It gained ground in March as concerns over the conflict deepened, but gave back some of those gains this month as optimism over a potential resolution grew.
Meanwhile, the yen gained after four days of losses, rising 0.2pc to 159.4 per dollar.
Traders are looking ahead to a central-bank-heavy week next week, with the Bank of Japan, the European Central Bank, the Bank of England and the Federal Reserve among those due to deliver policy decisions.
“The main message from the central banks is that they are – so far at least – in a kind of ‘wait-and-see’ approach,” Handelsbanken’s Von Bromsen said.
The European Central Bank will hold its deposit rate on April 30 but hike it in June, according to just over half of economists polled by Reuters, in a bid to prevent a war-induced energy shock from knocking the euro zone economy off balance.
The Bank of England will meet on Thursday with money markets pricing in a hike by the end of the year, but no change at next week’s meeting.
Meanwhile in Japan,core consumer inflation slowed below the central bank’s 2pc target for a second straight month in March. Analysts, though, expect inflation to accelerate back above the Bank of Japan’s target in coming months, as companies begin to pass on higher fuel costs from the Middle East conflict.
The BOJ is set to hold its two-day policy meeting ending on Tuesday. Reuters reported the bank is likely to hold off raising interest rates next week as fading prospects of a near-term end to the Middle East war keep the country’s economic and price outlook highly uncertain.
The Australian dollar rose 0.2pc versus the greenback to $0.7143. New Zealand’s kiwi rose 0.3pc to $0.5871.
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