By Gregor Stuart Hunter and Samuel Indyk
LONDON, April 13 (Reuters) – The safe-haven dollar firmed on Monday after peace talks between the U.S. and Iran broke down nL1N40U07M and as the American Navy prepared a blockade of Iranian ports, while the Hungarian forint jumped after the upstart centre-right Tisza party defeated Viktor Orban in a landslide election victory.
The euro was down 0.3% at $1.1694, while the British pound fell 0.2% to $1.3429, although both were above earlier lows. The risk-sensitive Australian dollar was 0.3% lower at $0.7052 and the New Zealand dollar was off 0.1% at $0.5834.
President Donald Trump on Sunday said the U.S. Navy would start blockading the Strait of Hormuz after talks with Iran failed to reach a deal to end the war, jeopardising a fragile two-week ceasefire. The U.S. Central Command said U.S. forces would begin implementing the blockade of all maritime traffic entering and exiting Iranian ports from 10 a.m. ET (1400 GMT) on Monday.
“What we’re seeing this morning is positive for the dollar, but we’re not seeing the large movements that we saw earlier in the war,” said Tommy von Brömsen, foreign exchange strategist at Handelsbanken, adding that the U.S. inability to conduct sound policy could start to push investors away from the U.S. currency.
The dollar has tended to benefit when tensions between Iran and the U.S. have flared, given its status as a safe-haven and the limited exposure of the U.S. to imported energy-price inflation.
Crude prices jumped on Monday, with Brent crude futures back above $101 per barrel.
The latest data from the Commodity Futures Trading Commission showed that speculators raised their net long positions in the U.S. dollar in the latest week. Positioning in the euro flipped to a net short for the first time since March last year, the CFTC said on Friday.
The Hungarian forint surged nL8N40W056 after veteran nationalist leader Viktor Orban lost power nL1N40V01B to Peter Magyar’s Tisza party in Sunday’s national election after 16 years in office.
The currency rallied as much as 2.4% to 312.36 against the dollar – its strongest level since February 2022 – and jumped more than 2% against the euro.
“The constitutional majority allows for a smooth transfer of power for the opposition and a faster path to unlocking EU funds, which are the main focus of investors, giving Hungarian assets another reason to extend their rally,” said ING FX strategist Frantisek Taborsky.
YEN WEAKENS
Against the yen, the U.S. dollar was up 0.3% at 159.68 as yields nL4N40V03Y on Japan’s benchmark 10-year government bonds jumped 5.5 basis points to 2.49%, the highest in almost three decades.
Bank of Japan nL1N40W05N Governor Kazuo Ueda said on Monday that economic and price developments were moving roughly in line with the bank’s forecasts, but called for vigilance to the impact of the escalating conflict in the Middle East.
Analysts said Ueda’s speech could be one of the last opportunities for the BOJ to signal whether it will raise interest rates later this month. Money market traders are pricing in about 8 basis points of tightening at the April 28 meeting, implying about a one-in-three chance of a quarter-point hike.
“The risk of policy errors is relatively high in Japan and Europe, which means that money will tend to return to USD assets for lack of better alternatives,” analysts from Nomura wrote in a note.
(Reporting by Gregor Stuart Hunter and Samuel Indyk; Editing by Thomas Derpinghaus, Kirsten Donovan)
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