The U.S. dollar edged higher on Monday as geopolitical tensions between Israel and Iran drove safe-haven demand, with investors bracing for key central bank decisions this week. Fears of a broader regional conflict intensified after Israel’s surprise attack on Friday led to the suspension of U.S.-Iran nuclear talks. Analysts warn that Iran may attempt to block the Strait of Hormuz, a vital oil trade route, posing broader economic risks.
The dollar rose 0.14% to 144.3 yen, while the euro slipped 0.14% to $1.1534. The greenback was steady against the Swiss franc at 0.81, and the dollar index held firm at 98.25. Risk-sensitive currencies like the Australian and New Zealand dollars saw marginal gains. Despite recent gains, analysts remain cautious on the dollar’s longer-term trajectory, especially if the Federal Reserve signals a dovish stance.
Brown Brothers Harriman’s Win Thin noted that the dollar’s safe-haven status may be tested, particularly amid weakening U.S. fundamentals. Markets expect the Fed to keep rates unchanged on Wednesday, with investors closely watching for comments on slowing economic growth and persistent inflation risks. Chris Weston of Pepperstone said the Fed's growth forecast will likely shift downward, keeping its policy tone neutral.
The Bank of Japan is also expected to maintain rates on Tuesday, though it may begin scaling back bond purchases next fiscal year. Central banks in the UK, Sweden, and Norway are also set to announce policy updates this week.
In commodities, gold climbed 0.22% to $3,435.5 an ounce, nearing April’s record high. Longer-dated U.S. Treasuries dipped slightly after Friday’s gains, reflecting market caution over potential inflationary effects from ongoing geopolitical turmoil.


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