US dollar firms near weekly peak on Iran truce scepticism, strong data

The US dollar steadied near a one-week high in early Asian trade on Wednesday as investors raised fresh doubts about the durability of President Donald Trump's announcement that the Iran ceasefire would be extended indefinitely.

That scepticism, combined with hawkish-leaning remarks from Federal Reserve chair nominee Kevin Warsh and a record jump in US retail sales, gave the safe-haven currency a broad base of support even as geopolitical hopes remained fragile.

The dollar index held near 98.415, close to its highest level since mid-April, with the euro little changed at $1.1739 and other major peers showing only modest moves in thin early trade.

The combination of political uncertainty and firmer data is proving enough to keep the greenback supported.

Ceasefire scepticism revives safe-haven demand

Investors entered Wednesday's session with more questions than answers about the ceasefire extension.

Trump's announcement that the truce would last until negotiations concluded was made unilaterally, and it was not immediately clear whether Iran or US ally Israel had formally agreed to the terms.

That ambiguity was enough to revive some demand for defensive assets.

Analysts say there are still many unanswered questions around what this means, with a high degree of scepticism in the market.

That caution was reinforced by commentary suggesting that internal divisions within Iran, particularly between hardline and more moderate factions, remain the single biggest obstacle to any lasting agreement.

For the dollar, that backdrop is supportive.

When diplomacy looks fragile, investors tend to move towards the safety of the US currency and away from higher-beta peers.

That dynamic has played out before during this conflict and appears to be at work again at the start of the Asian session.

Warsh comments and data keep the greenback firm

Beyond geopolitics, two domestic factors added to the dollar's support.

Federal Reserve chair nominee Kevin Warsh told senators on Tuesday he had made no promises to Trump to lower interest rates if confirmed, and emphasised the independence of the central bank.

The remarks were interpreted as marginally hawkish by some analysts, reinforcing expectations that rate cuts may not come as quickly as some in the market had hoped.

That came alongside a record jump in US retail sales for March, which significantly exceeded expectations and pointed to an economy still running with more momentum than many had assumed.

Strong consumer spending data is a reminder that the Federal Reserve may have less urgency to ease policy, which in turn supports higher yields and a firmer dollar.

JPMorgan's chief Japan foreign exchange strategist Junya Tanase said the Warsh comments were slightly hawkish but that bond market pricing barely moved.

That suggests the primary driver of the dollar's recent firmness is the interplay between oil, geopolitical risk and data rather than a dramatic shift in rate expectations, but the direction of travel is supportive of the greenback.