May 28 The U.S. dollar was higher on Thursday, just off its strongest level since early April touched in Asian trading hours, as doubts grew over prospects of a deal to reopen the Strait of Hormuz and focus shifted to possible U.S. interest rate hikes.
Iran’s Revolutionary Guard targeted a U.S. airbase on Thursday according to an Iranian media report, hours after U.S
President Donald Trump rejected a report he was close to a compromise deal with Tehran. The dollar surged in March after Iran’s effective closure of the Strait of Hormuz sent oil prices soaring, hitting importers such as Japan and the euro zone and boosting safe-haven demand for the greenback. It fell after Trump announced a two-week ceasefire on April 7, before recovering in May on growing doubts about a lasting deal.
Investors are also assessing the Federal Reserve’s interest rate outlook ahead of economic data later in the session. “Given that statements from FOMC members have become increasingly hawkish in recent days and weeks, which is certainly one of the key reasons for the shift in market expectations towards interest rate hikes, it will be decisive whether the figures support these expectations,” Commerzbank rate strategist Michael Pfister said. Governor Christopher Waller said last Friday that the Fed should axe the “easing bias” from its policy statement and effectively open the door to a possible rate hike. ING analysts recently said the hawkish Fed narrative is likely to dominate in the coming weeks, warning the euro may struggle to hold above the $1.1650–$1.1660 range.