Safe-haven dollar gains as peace talks falter, US to blockade Hormuz
US dollar banknotes are seen in this illustration taken on March 24.
PHOTO: Reuters file
SINGAPORE — The safe-haven dollar advanced broadly in early Asian trade on Monday (April 13), as peace talks between the US and Iran broke down and the US Navy prepared a blockade of Iranian ports.
The euro was down 0.3 per cent at US$1.1684 (S$1.49), while the British pound fell 0.5 per cent to US$1.3398.
The risk-sensitive Australian dollar was 0.6 per cent lower at US$0.7030, and the New Zealand dollar was off 0.4 per cent at US$0.5816.
US President Donald Trump said on Sunday the US Navy would start blockading the Strait of Hormuz after marathon talks with Iran failed to reach a deal to end the war, jeopardising a fragile two-week ceasefire.
The US Central Command said US forces would begin implementing the blockade of all maritime traffic entering and exiting Iranian ports from 10am (10 SGT) on Monday.
"Early and thin FX trading this morning is showcasing a risk-off mood, with the broad-based rally in the USD in response," analysts from Westpac wrote in a research note.
The Hungarian forint surged after veteran nationalist leader Viktor Orban lost power to the upstart centre-right Tisza party in Sunday's national election after 16 years in office.
The currency rallied as much as 1.8 per cent to 314.89 against the dollar, its strongest level since January, and jumped 2.2 per cent against the euro to its firmest in four years.
"Hungarian assets have reacted positively to the news in early trading, in part because the outcome implies that EU fund inflows into Hungary will be fully released relatively quickly," analysts from Goldman Sachs wrote in a research report.
"EU funds from the current 2021-27 budget account for roughly three per cent of GDP per year, with nearly half currently frozen."
The US dollar index, which measures the greenback's strength against a basket of six currencies, held steady at 99.056, near its highest level since April 7.
Against the yen, the US dollar was up 0.4 per cent at 159.83 yen (S$1.28) as yields on Japan's benchmark 10-year government bonds jumped 5.5 basis points to 2.49 per cent, the highest level in almost three decades.
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