Foreign Exchange Market Holds Its Breath, Dollar Stable Amid Global Energy Risks

The US dollar moved steadily in Monday’s trading. Uncertainty over efforts to end the war in the Middle East is holding back market movements. Market participants tend to be cautious. Other major currencies are also moving within limited ranges. The Japanese yen remains below the psychological level of 160 per US dollar. The market is awaiting the Bank of Japan’s decision this week. US President Donald Trump previously cancelled his envoy’s visit to Islamabad. He stated that Iran can contact the US if it wishes to negotiate an end to the conflict that has lasted two months. The Strait of Hormuz remains closed. This route handles around one-fifth of global oil and gas distribution. Sentiment briefly improved. An Axios report indicated that Iran submitted a new proposal through Pakistani mediators. The proposal includes reopening the Strait of Hormuz and halting the war. Nuclear negotiations would be deferred to the next stage. The US dollar index was recorded at 98.491. This index measures the greenback’s strength against six major currencies. The dollar strengthened in March when the conflict erupted. Its status as a safe-haven asset drove demand. The strengthening then faded. Hopes for a peace agreement strengthened briefly, then weakened again as talks stalled. The dollar’s movements are now tending towards flat. “I’m surprised that the market is so confident, even perhaps indifferent, about progress in the talks and the prospects for a peace deal,” said senior analyst at Capital.com, Kyle Rodda. “Peace may not last, and if it doesn’t, the market will have to make some pretty drastic price adjustments,” he added. This situation continues to weigh on global investor sentiment. The conflict is also pushing up energy prices. Brent crude prices rose around 1% to $106.7 per barrel, equivalent to about Rp1,837,000 per barrel. West Texas Intermediate or WTI crude was at $95.53 per barrel, equivalent to about Rp1,645,000 per barrel. The increase reached 1.2%. The rise in energy prices is triggering inflationary pressures. Risks to global economic growth are also increasing. “Although a period of mild stagflation is already anticipated, time is running out to see if this will turn into a more severe period like that seen in the 1970s,” said AMP Chief Economist Shane Oliver.