The US Dollar (USD) gained strength across major currency pairs on Tuesday, supported by safe-haven demand as uncertainty persisted over US-Iran peace talks and the closure of the Strait of Hormuz [6][7][5][8]. US President Donald Trump discussed Iran's proposal to reopen the Strait and end the war, but White House press secretary Karoline Leavitt stated it remains unclear if Trump will entertain the offer, as his bottom-line demands remain unchanged [2][3][7]. Iran's proposal would postpone discussions on its nuclear program, a condition US officials, including Secretary of State Marco Rubio, appeared unwilling to accept [6][7]. The ongoing blockade and restrictions on Gulf shipping have kept oil prices elevated, with WTI trading 0.6% higher near $95.60, close to its two-week high of $97 [2]. This has pressured oil-importing currencies such as the Indian Rupee (INR), with USD/INR rallying to near 94.46 and approaching its all-time high around 95.20 [2]. Foreign Institutional Investors (FIIs) have been net sellers in the Indian equity market, offloading Rs. 18,291.34 crore in the last six trading days due to concerns over earnings projections amid high oil prices [2].
The US Dollar Index (DXY) held gains near 98.50, rebounding after two days of losses, as traders awaited the Federal Reserve's (Fed) monetary policy announcement on Wednesday [6]. The Fed is widely expected to keep interest rates unchanged at 3.50%-3.75% for the third consecutive meeting, with market participants closely watching outgoing Chair Jerome Powell's comments for future policy cues [2][3][5][6][7][8]. The anticipation of the Fed's decision has led to cautious trading in other major pairs: EUR/USD held above 1.1700 as USD bulls hesitated ahead of the FOMC meeting [8], GBP/USD steadied around 1.3530 with a bullish bias, and NZD/USD slipped to 0.5900 as US-Iran tensions supported the USD [4][5][8]. USD/CAD posted modest gains near 1.3635, supported by safe-haven flows, though technical indicators suggest persistent downside pressure [3]. USD/CHF gathered strength above 0.7850, with the Swiss National Bank maintaining its policy rate at 0% and reaffirming its willingness to intervene in FX markets [7].
In Australia, the AUD traded mixed ahead of the Q1 Consumer Price Index (CPI) release, with expectations for a 1.4% quarterly rise and 4.1% annualized increase, potentially influencing the Reserve Bank of Australia's (RBA) policy outlook. There is an 82% chance of an RBA rate hike in May, according to Reuters [1]. The AUD was strongest against the Swiss Franc but marginally lower against the USD around 0.7180 [1].
Technical analyses across the board indicate cautious optimism for USD pairs, with resistance and support levels highlighted for GBP/USD, EUR/USD, USD/CAD, and NZD/USD [3][4][5][8]. Market participants are focused on the Fed's policy outcome, with bets for at least one rate cut in 2026 and attention on Powell's press conference for forward guidance [5][6][8]. The Swiss National Bank's expansionary policy and willingness to intervene add another layer of uncertainty for USD/CHF [7].
Overall, the combination of geopolitical tensions, elevated oil prices, and central bank policy expectations has driven high volatility and safe-haven flows into the US Dollar, impacting global currency markets and equity flows [2][3][5][6][7][8].
CONCLUSION
The US Dollar has strengthened amid geopolitical uncertainty and anticipation of the Federal Reserve's policy decision, with safe-haven flows dominating currency markets. Elevated oil prices and stalled US-Iran talks have pressured oil-importing currencies and contributed to equity outflows in India. Market participants remain focused on central bank guidance, particularly from the Fed and RBA, as volatility persists.