By Kevin Buckland and Lucy Raitano TOKYO/LONDON, May 21 The U.S. dollar firmed on Thursday after Reuters reported that Iran’s supreme leader has issued a directive that the country’s near-weapons-grade uranium should not be sent abroad, potentially complicating talks on ending…
e U.S.-Israeli war on Iran. The dollar tends to rise when tensions flare in the Middle East, as higher oil prices weigh on oil-dependent economies such as Japan and the euro area, while safe-haven demand for the greenback increases
The dollar rose 0.2% against the yen to 159.110 yen after falling for the first time in eight sessions against the yen on Wednesday. U.S. President Donald Trump on Wednesday had said negotiations with Tehran were in the final stages, while also warning of further attacks if Iran does not agree to a deal.
The dollar index has been largely steady so far in May, rising just 0.1%, with broader currency markets relatively calm during the energy price shock in recent weeks. “The market is already hoping there is going to be a quick deal to bring an end to the conflict,” Lee Hardman, senior currency economist at MUFG, said, adding such a scenario would be dollar negative initially. However, there could be more economic fallout from energy prices, he said, adding: “There’s still a significant risk that things will get worse before they gets better.” Elsewhere, Bank of Japan policy board member Junko Koeda added a measure of support for the yen with hawkish comments on Thursday, saying in a speech that the central bank needs to continue to raise rates with underlying inflation already around a 2% target. The euro was 0.26% down at $1.15935, after dipping on Wednesday to its weakest level since April 7 at $1.1583 before bouncing back.