The US dollar saw a slight increase on Tuesday, recovering from a dip the previous day, as doubts about Middle East peace discussions prompted investors to remain cautious.
US officials voiced optimism that negotiations with Iran would proceed in Pakistan, though major obstacles persist with the two-week truce nearing its end.
President Donald Trump declared the truce with Iran on April 7. Although he did not specify an exact expiration, April 21 would complete the two weeks, potentially falling on Tuesday evening in the US and Wednesday morning in Iran. Iran’s military has stated readiness for a swift and firm reaction to any resumed aggression from opponents.
The dollar index, tracking the currency against a group including the yen and euro, rose 0.15% to 98.24 following a 0.2% drop on Monday.
The ongoing conflict with Iran has typically bolstered the dollar through safe-haven buying, while increasing Brent crude oil prices have pressured the euro and yen, given their regions’ heavy reliance on oil imports.
“This dual scenario of geopolitical uncertainty is maintaining a strong influence on foreign exchange markets, and while discussions continue, the US dollar may face downward pressure,” noted Paul Mackel, HSBC’s global head of forex research, highlighting mixed signals on reducing tensions.
“The reverse would apply as well.”
Market participants will also monitor the Senate confirmation for Kevin Warsh, nominated by Donald Trump for Federal Reserve chair, where topics like monetary strategy, the Fed’s autonomy, and its asset holdings will be central.
“Considering the setting, Warsh might not appear excessively accommodative compared to market expectations, setting aside his perspective that AI-driven productivity could enable lower rates over time,” Mackel from HSBC commented.
The euro held at $1.1782, down about 0.2% for the day.
Lately, the euro has mirrored shifts in energy costs, especially natural gas, declining when gas prices surge and rising when they fall.
TRPC Natural Gas futures reached $68.20 on March 19, the peak since January 19, but have dropped to approximately $39 since then.
The euro has advanced since hitting $1.1409 on March 16, its lowest point since August 2025.
Traders anticipate roughly two rate increases from the European Central Bank by year-end, though President Christine Lagarde indicated the need for additional data before finalizing decisions. Experts foresee no rate changes this month.
The yen remained steady at 158.80 against the dollar, staying close to the 160 threshold that traders view as a potential trigger for intervention.
Sources indicate the Bank of Japan will probably avoid rate hikes next week, due to dimming chances of a quick resolution to the Middle East conflict, which clouds Japan’s economic and inflation forecasts.
The New Zealand dollar stood at $0.5911, up 0.3%. The country’s yearly inflation held at 3.1% in the first quarter, exceeding the central bank’s target, raising prospects for more rate increases this year.
Focus will turn to US retail sales data for March, expected later today, with forecasts of a substantial 1.4% rise.
