FUNDAMENTAL OVERVIEW USD: The US dollar has come under renewed pressure despite the lack of progress in the US-Iran negotiations and the Strait of Hormuz closure.
FUNDAMENTAL OVERVIEW USD: The US dollar has come under renewed pressure despite the lack of progress in the US-Iran negotiations and the Strait of Hormuz closure. What has been weighing on the greenback to start the week was the news saying that Iran proposed to reopen the Strait of Hormuz if the US blockade is lifted and then hold nuclear talks later.
This constant push towards a diplomatic resolution instead of another full-fledged war has been supporting the risk sentiment on expectations that a deal would be reached eventually. On Wednesday, we have the FOMC policy decision and although the Fed is expected to keep everything unchanged amid the US-Iran uncertainty, there’s a risk of a more hawkish leaning due to resilient US data and the elevated energy prices. A neutral Fed shouldn’t bring much volatility, but a more hawkish one could give the US dollar a significant boost given the recent selloff.
INR: On the INR side, the US-Iran stalemate led to another selloff with the Indian Rupee erasing all the gains since the start of the month. The currency will likely remain under pressure as long as the situation in the Strait of Hormuz remains unresolved. In the big picture, the Indian Rupee remains on a bearish structural trend against the US dollar, so the dip-buyers will likely look for opportunities around strong technical levels to keep pushing into new highs.