Dollar steadies as fragile US-Iran ceasefire weighs on markets

TOKYO: The dollar caught its breath ​in early Thursday trade after broad losses, as investors anxiously assessed whether a fragile two-week ‌ceasefire between the United States and Iran would hold.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.03% to 99.09, with the euro down 0.07% at $1.1654.

The yen also gave ​back some of the previous day's gains, weakening 0.06% against the greenback to 158.7 per dollar. ​Sterling eased 0.04% to $1.3387.

The greenback sank to a one-month low on Wednesday after the announcement ⁠of the truce in the Middle East conflict.

Still, the deal appeared to be on thin ice, as Israel ​continued its parallel war against the Iran-aligned militia Hezbollah in Lebanon, while Tehran accused both Israel and ​the U.S. of violating the agreement and said that proceeding with peace talks would be "unreasonable."

The Strait of Hormuz also remained shut to vessels sailing without a permit and shippers said they before resuming transit.

"Any signs that the ceasefire ​is breaking down, whether through renewed restrictions in the strait or spillover from regional conflicts like Lebanon, ​could push oil prices higher again, strengthen the U.S. dollar and weigh on risk assets," said Daniela Hathorn, senior market analyst ‌at ⁠capital.com.

The dollar has been the major beneficiary of the Iranian currencies, in part because the U.S. is a net energy exporter and therefore less exposed to the economic hit that oil importers like Japan and many European countries might face.

The five-week war has shaken investor confidence, triggering the largest disruption to global oil ​and gas supplies on ​record.

The uneasy truce leaves ⁠Iran with greater leverage over shipping through the vital strait than before the conflict, analysts say, after President Donald Trump backed off from his threats to attack ​Iran's civilian infrastructure.

The U.S. is set to release February personal spending and the ​PCE deflator ⁠on Thursday. Despite improved sentiment following the ceasefire agreement, the dollar-yen pair may remain range-bound in Tokyo trading, although strong U.S. data could trigger a rebound in the dollar, Akihiko Yokoo, senior analyst at Mitsubishi UFJ Bank, said in ⁠a ​note.

Bank of Japan Governor Kazuo Ueda is expected to appear ​in the parliament from 0415 GMT on Thursday.

The Australian dollar weakened 0.13% versus the greenback to $0.7034. New Zealand's kiwi eased 0.02% versus ​the greenback to $0.5821.

In cryptocurrencies, Bitcoin fell 0.50% to $71,018.20. Ethereum declined 0.96% to $2,188.86.