The US Dollar (USD) maintained a firm stance on Thursday, with the US Dollar Index (DXY) trading around 98.20, halting its losing streak that began on April 6 [2]. This resilience comes despite a prevailing risk-on mood in equity markets, as the S&P 500 reached an all-time high [1]. Treasury Secretary Bessent acknowledged that while eventual Federal Reserve (Fed) rate cuts are anticipated, a pause before any reduction is likely, reflecting ongoing caution in monetary policy [1].
Geopolitical developments in the Middle East, particularly uncertainty around the Strait of Hormuz due to a dual blockade, have provided some support to the Greenback as traders seek safe-haven assets [2]. However, hopes for a resolution are weighing on the USD, with US President Donald Trump stating that the war was “close to over” and that negotiations between the US and Iran are “productive and ongoing” [2][3]. Trump also mentioned potential direct talks between Israel and Lebanon, though Lebanese authorities have not confirmed this [3]. Speculation about a possible two-week extension of a ceasefire was reported, but Trump downplayed the need for such a measure, emphasizing ongoing negotiations [2].
On the economic front, the Treasury reported that foreigners increased their holdings of US Treasuries by $197.7 billion in February [1]. Upcoming US jobless claims and industrial production data, along with speeches from Fed officials Miran and Williams, are highlighted as key near-term drivers for the Dollar and Treasury market sentiment [1]. Cleveland Fed President Beth Hammack noted that the trajectory of energy prices remains a crucial factor for inflation, while St. Louis Fed President Alberto Musalem expects core inflation to remain close to 3% throughout the year, partly due to the oil shock from the Middle East conflict [2]. The Fed is broadly expected to keep interest rates unchanged this month and potentially for the rest of the year [2].
In currency markets, the USD/CHF pair traded flat above the 0.7800 area, with upside attempts capped below Monday’s highs at 0.7830, as easing safe-haven demand limited further gains [3]. Technical indicators for USD/CHF remain negative, suggesting continued downside pressure, though bearish momentum has eased [3]. The USD was strongest against the New Zealand Dollar, gaining 0.25% on the day, and posted modest gains against the Euro (0.13%) and Swiss Franc (0.08%) [3].
CONCLUSION
The US Dollar remains supported by geopolitical uncertainty and cautious Fed policy, though hopes for Middle East de-escalation are tempering safe-haven demand. Market participants are closely watching upcoming US economic data and Fed commentary for further direction. Overall, the Dollar's outlook is balanced between persistent inflation concerns and the potential for geopolitical risk to subside.