By Jiaxing Li HONG KONG, April 16 (Reuters) - The U.S. dollar held near its lowest level since early March against major currencies on Thursday, as the White House's optimism over a peace deal with
US dollar gains on technical rally; US-Iran peace hopes cap safe-haven demand
US Dollar Strengthens Amid Geopolitical Developments and Economic Data
By Gertrude Chavez-Dreyfuss
NEW YORK, April 16 (Reuters) - The U.S. dollar climbed against major currencies on Thursday, retracing some of its recent losses on a technical recovery, as investors awaited news about a possible U.S.-Iran peace deal.
US-Iran Peace Talks and Market Sentiment
President Donald Trump said the U.S.-Israeli war with Iran was "close to over," while the White House expressed optimism about a deal, saying more in-person talks would likely take place in Pakistan over the weekend.
Yet an Iranian official said big splits remained, including over Tehran's nuclear ambitions, even as the two sides have made some progress.
Analyst Perspectives on the Dollar Rally
"We're seeing a bit of a relief bounce here in the dollar and the cyclical backdrop for the currency is still neutral over the next few months," said Elias Haddad, global head of markets strategy at Brown Brothers Harriman in London.
"There are hopes of a diplomatic off-ramp on the U.S.-Iran conflict and that continues to support this recovery that we're seeing in financial market risk sentiment," he said, adding that Thursday's rally in the safe-haven dollar will likely be limited.
Euro and Dollar Index Movements
Euro Retreats from Recent Highs
EURO FALLS OFF 7-WEEK HIGH
In afternoon trading, the euro fell from a seven-week high against the dollar of $1.1823, and was last down 0.1% at $1.1782.
Dollar Index Performance
The dollar index, which measures the currency's strength against six major peers, rose 0.2% to 98.19. The index, whose biggest component is the euro, earlier fell to its lowest level since late February. It was on track for its largest daily gain in two weeks, however.
The index has declined for eight straight sessions through Wednesday to give up most of the gains sparked by the war, as a ceasefire revived appetite for riskier currencies.
Market Uncertainty and Inflation Outlook
That said, some market participants warned that "peak uncertainty" is not behind us just yet given that the U.S.-Iran ceasefire, which expires next week, is still fragile, and questions about the inflation outlook remain.
"It's not so much whether peak uncertainty has passed, but whether the market has already priced in and maybe moved beyond the worst-case outcome that the uncertainty produced," wrote Anthony Saglimbene, chief market strategist at Ameriprise, in emailed comments.
"On that basis, we believe the market is walking away from worst-case scenarios and rightfully so."
Dollar Performance Against Other Major Currencies
Dollar-Yen Movement
Against the yen, the dollar advanced 0.2% to 159.21 yen. The move followed news that Japan's Finance Minister Satsuki Katayama said that the country and the United States agreed to intensify communication on exchange rates after she met with U.S. Treasury Secretary Scott Bessent on Wednesday.
Impact of US Economic Data
The greenback also drifted higher after data showed initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 207,000 for the week ended April 11. Economists polled by Reuters had forecast 215,000 claims for the latest week.
Other Major Currencies React to Dollar Strength
Sterling and UK Economic Data
CURRENCIES RETREAT VS DOLLAR
Sterling was last 0.2% lower against the dollar at $1.3534, after hitting its lowest since mid-February. It rose from the day's lows, however, after data showed UK growth beat expectations in February.
Britain's economy grew 0.5% month-on-month in February, the UK Office for National Statistics said, the biggest increase since January 2024 and well above economists' expectations for 0.2% growth.
Asian Currencies and Economic Indicators
In Asia, the offshore yuan traded at 6.8231 yuan per dollar, down 1%. It rose earlier in the session after data showed China's economy grew 5% in the first quarter, beating analysts' expectations, picking up speed on strong exports and policy support.
Australian Dollar and Rate Expectations
The Australian dollar, which is often seen as a proxy for sentiment about the global economy, earlier rose to a four-year high of US$0.7197 before falling. It was last down 0.2% at US$0.7159.
Earlier, data showing Australian employment rose broadly in line with expectations in March was supportive of the Aussie dollar overall. The data prompted markets to maintain bets on a roughly 70% chance the Reserve Bank of Australia will raise rates again in May.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Jiaxing Li in Hong Kong, Rae Wee in Singapore, and Harry Robertson in London; Editing by Rod Nickel and Andrea Ricci )
