Investing.com – The U.S. dollar lost ground on Wednesday in a volatile move as traders digested reports of Israeli strikes on Iranian targets and their impact on risk appetite.
At 5:25 a.m. ET (0925 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 105.870, having earlier risen to 106.190, just slightly below its five-month high. indicator. a peak of 106.51 was observed earlier this week.
Dollar returns after Israeli strikes
The safe-haven dollar jumped higher on Friday following reports that Israel attacked Iran in an escalating conflict in the Middle East, just days after Iran carried out a drone strike on Israel.
The move marks a potential escalation in the Iran-Israeli conflict and could herald a worsening geopolitical situation in the Middle East, especially after initial reports suggested strikes near Iranian nuclear sites.
However, those gains have since faded after Iranian news agencies said there was no damage to the facilities and the scale of the strikes was fairly limited.
However, the dollar is likely to have a positive week as strong US economic data and persistent inflation prompted investors to radically rethink the chances of a rate cut by the Federal Reserve in the near future.
A slew of hawkish comments from Fed officials also helped the dollar, as evidenced by the Atlanta Fed president’s announcement on Thursday that if inflation doesn’t continue to move toward the U.S. central bank’s 2% target, central banks will have to consider interest rates. -increase in tariffs.
Sterling rose despite weak UK retail sales
In Europe, the measure rose 0.1% to 1.0648 after falling less than expected in March, down 2.9% for the year compared with forecasts for a 3.2% decline.
In addition, Reuters reported that the German government will raise its growth forecast for the German economy this year to 0.3% from the previous forecast of 0.2%.
However, any strength in the euro may well be temporary as the Federal Reserve is now expected to cut interest rates in an attempt to give a boost to the region’s struggling economies.
rose 0.1% to 1.2445, trading just above a five-month low despite stagnation in the UK in March.
Sales volumes showed no growth last month, falling below an expected 0.3% increase, meaning they did not rise on a monthly basis for the first time since December.
Weakness in retail spending raises the possibility that interest rates will begin to cut in the summer, likely ahead of the Federal Reserve.
Yen surges thanks to safe haven status
In Asia, shares traded 0.1% lower at 154.47, with the safe-haven yen strengthening amid rising tensions in the Middle East.
The Japanese currency remained near 34-year lows, prompting caution regarding possible government intervention.
The yuan rose 0.1% to 7.2417, with the yuan nearing a five-month high amid uncertainty over the Chinese economy.