By Ankur Banerjee
SINGAPORE, April 6 (Reuters) – The dollar was steady on Monday, while the yen flirted with the crucial 160 per dollar level as nervous investors took stock of the escalating Iran war, with all eyes on the latest deadline from U.S. President Donald Trump to reopen Strait of Hormuz.
In an expletive-laden Easter Sunday social media post, Trump threatened to target Iran’s power plants and bridges on Tuesday if the strategic waterway is not reopened, setting a precise deadline of Tuesday 8 p.m. Eastern Time (0000 GMT).
With most of Asia and Europe closed for holiday on Monday, liquidity is likely to be thin, although risk-off sentiment has broadly set in at the start of the week.
“Trump’s latest deadline itself is bearish not because investors think war is guaranteed tomorrow if Iran does not open the Strait, but because every new ultimatum makes the disruption look longer, stickier, and more macro-negative,” said Charu Chanana, chief investment strategist at Saxo in Singapore.
“Investors are treating this as an oil-to-inflation-to-rates problem, which is why the dollar remains the cleanest haven for now, while gold, bonds and yen have all looked far less reliable than in a normal geopolitical scare.”
The euro eased 0.13% to $1.151 in early trading, while sterling last fetched $1.3187. The dollar index, which measures the U.S. currency against six rivals, was at 100.2.
The Australian dollar was 0.13% higher at $0.6893, wobbling near the two-month low it hit last week.
Global markets have been rattled since the U.S.-Israel war with Iran broke out at the end of February, with Tehran effectively closing the Strait of Hormuz, a key waterway that carries about a fifth of the world’s total oil consumption.
That has led to oil prices surging well above $100 per barrel, stoking fears of high inflation and upending rates outlook across the world. Worries about the hit to economic growth has also weighed as stagflation risks swirl.
Traders are now no longer pricing a move from the Federal Reserve well into the second half of 2027 compared with expectations of two rate cuts in 2026 at the start of the year.
Data last week suggested U.S. labour market conditions remained calm in March though economists warned that a prolonged war in the Middle East posed a downside risk.
ING economist James Knightley said despite the better-than-expected outcome in the payrolls report, there are only 260,000 more people in work today than 12 months ago, implying that the jobs market has effectively stalled during a period when the U.S. growth story was healthy.
“Our concern is that with the Middle East conflict showing little sign of coming to an imminent conclusion, an overlay of heightened geopolitical, economic and market angst is not going to incentivise business to suddenly start hiring now,” Knightley said.
YEN VIGIL
The Japanese yen weakened to 159.77 per U.S. dollar, not far from the 21-month low it hit last week as traders watch out for indications of Tokyo intervening in the wake of volleys of strong warnings from officials in the past few days.
Japanese Finance Minister Satsuki Katayama on Friday put currency traders on notice, saying the government stands ready to act against speculative moves in foreign exchange markets as volatility has risen “significantly.”
Still, many doubt the firepower of any intervention at a time when geopolitical turmoil in the Middle East is fuelling relentless demand for the safe-haven dollar. The yen is down 1.5% since the war started, stuck near the 160 level.
Speculators have also been adding to their short yen positioning, with the latest weekly data showing a short position worth $5.7 billion, the highest since July 2024, when Japan last intervened in the FX markets.
(Reporting by Ankur Banerjee in Singapore; Editing by Sam Holmes)
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