Dollar eases with oil on hopes of swift end to iran war

Dollar Retreats, Oil Falls as Markets Hope for Quick Resolution to Iran War

By Jiaxing Li

Market Reactions to Middle East Conflict

HONG KONG, March 10 (Reuters) - The dollar lost some of its safe-haven appeal on speculation that the war in the Middle East could prove limited on Tuesday, pulling down skyrocketing oil prices and boosting risk assets.

Currency Movements and Oil Prices

At 157.73 yen and $1.1632 per euro, the greenback was firm in early Asia trade, but it has retreated from day-earlier highs after U.S. President Donald Trump said war against Iran was "very complete." Washington was "very far ahead" of his initial four- to five-week time estimate, he told CBS News.

The comments were quickly rejected as "nonsense" by Iran's Revolutionary Guards, but they seemed to hold traders back from deepening worries about an oil shock and put them in a wait-and-watch stance.

Oil Price Fluctuations

Brent crude futures traded at $92.46 a barrel in the Asia morning, down from highs near $120 on Monday.

Impact on Risk-Sensitive Currencies

The risk-sensitive Australian dollar, which has loitered around 70 cents since war broke out, steadied at around $0.7068.

Market Sentiment and Volatility

"The market is just taking a breather," said Rodrigo Catril, senior currency strategist at National Australia Bank in Sydney.

"We're cautious in the sense that it may not be as simple as just declaring the end of the war ... our sense is that we haven't seen the end of the volatility."

Safe-Haven Demand and Economic Concerns

The dollar has been traders' shelter-of-choice as U.S. and Israeli attacks on Iran have all but frozen oil and gas exports through the Strait of Hormuz, sending energy prices soaring.

Investors are worried that could curtail global growth by acting as a tax on business and consumption, while at the same time pushing central banks away from easing rates.

Other Major Currencies

Sterling recovered from a Monday dip to hold at $1.3412 and the New Zealand dollar steadied at $0.5932.

Analyst Perspectives and Future Outlook

A Deutsche Bank analysis on Monday suggested larger market moves out of risky assets could require oil prices to stay at higher levels, a policy pivot from central banks and tangible signs of a broader economic slowdown.

Thresholds for Market Shifts

"How close are we to meeting those thresholds? Much closer than a week ago," said strategist Henry Allen.

Comparisons to Past Market Events

"But on several metrics we aren't quite there yet, which explains why equities aren't yet seeing bear-market declines, like we saw in 2022," he said, referring to the aftermath of an energy shock triggered by Russia's invasion of Ukraine.

(Writing by Jiaxing Li and Tom Westbrook; Editing by Thomas Derpinghaus)