SINGAPORE: Currency markets showed little movement in early Asian trading on Wednesday, as investors remained cautious about Donald Trump’s efforts to broker an end to the war with Iran.
Although Trump said at the White House that progress was being made, Tehran denied any direct negotiations, leaving market sentiment uncertain.
The euro inched up 0.1% to $1.1619, while most major currency pairs remained largely unchanged.
The British pound rose 0.1% to $1.3428, and the New Zealand dollar held steady at $0.5834.
Muted currency movements contrasted with stronger swings in other markets, including rising equity futures and a sharp drop in oil prices following optimism over potential negotiations.
“For those reacting to every breaking headline around dialogue between the U.S. and its allies and Iran, including speculation of high-level talks and temporary ceasefire proposals, an element of fatigue is now firmly setting in,” said Chris Weston.
Against the Japanese yen, the US dollar remained steady at 158.645 yen after minutes from the Bank of Japan’s January policy meeting indicated that many board members supported continued interest rate hikes without a fixed timeline.
The Australian dollar briefly fell 0.2% to $0.6983 before recovering, following February inflation data showing a 3.7% increase—slightly below expectations.
Market expectations for US monetary policy also shifted. While investors still largely expect no rate changes this year, the probability of a 25-basis-point hike at the Federal Reserve’s December meeting rose to 30.2%, according to CME Group’s FedWatch tool.
Michael Barr said the Fed may need to keep rates unchanged “for some time” before considering cuts, citing persistent inflation above the 2% target and risks stemming from Middle East tensions.
Bond markets stabilised after recent volatility, with the yield on the US 10-year Treasury falling 5 basis points to 4.338%.
Analysts at Westpac noted that rising oil prices have contributed to expectations of higher inflation and tighter monetary policy.
The US dollar index, which tracks the greenback against a basket of six currencies, slipped 0.1% to 99.126.
In cryptocurrency markets, Bitcoin rose 1.2% to $70,910.16, while Ethereum gained 0.8% to $2,164.74.
