* Dollar set for small weekly fall on possible US-Iran
ceasefire extension
* Kiwi reaches strongest level in three months
* Yen near key 160 level; data confirms intervention last
month
(Updates prices throughout, adds analyst quote)
NEW YORK, May 29 (Reuters) – The dollar slipped against
major currencies on Friday and was headed for a second straight
weekly loss after reports that the United States and Iran had
reached an agreement to extend their ceasefire and ease
restrictions on shipping through the Strait of Hormuz.
U.S. President Donald Trump said he would make a final
decision on Friday on a deal to prolong the truce with Iran. The
proposed agreement would extend the ceasefire by 60 days and
allow traffic to resume through the strategic waterway while
negotiators work through contentious issues, including Iran’s
nuclear programme, four sources told Reuters.
The greenback had initially rallied at the onset of the
conflict, buoyed by safe-haven demand and the U.S. economy’s
relatively limited exposure to energy-driven inflation. However,
it has since surrendered some of those gains as uncertainty
surrounding the conflict’s trajectory has weighed on investor
sentiment.
The euro was up 0.12% at $1.16620 and was on track
for a weekly gain. The pound sterling was up 0.18%
against the dollar at $1.3466, marking the second straight week
of gains.
“We don’t have answers about a lot of things and it’s
creating a divergence or lack of consensus or complete narrative
especially for central banks,” said Juan Perez, director of
trading at Monex USA in Washington. “That’s why you’re seeing
that reflected in the lack of movement in the U.S. dollar
overall.”
The dollar index, which measures the greenback
against a basket of currencies, was flat at 98.92, on track to
notch a weekly loss.
Data on Thursday showed U.S. inflation rising at its fastest
pace in three years in April, driven by higher energy prices due
to the Iran war and cementing economists’ views that the Federal
Reserve will hold interest rates unchanged well into next year.
“Equities are ignoring any issues about economic disruption
and you’re getting pretty much the same type of stasis in the
currencies because if you look at the potential for rate
increases, according to the CME and futures, it’s all on the
side of rate increases,” said Joseph Trevisani, senior
analyst at FXStreet.
“There’s nothing in the horizon but potential rate
increases. Yet you’re not seeing higher dollar rates.”
YEN INTERVENTION WATCH
The Japanese yen traded at 159.27 per dollar, remaining
near the traditionally significant 160 level that has
historically prompted interventions by Japanese authorities.
Japan’s Ministry of Finance confirmed on Friday that the
government spent 11.7 trillion yen ($73.5 billion) intervening
in currency markets over the past month to support the yen,
confirming what traders had widely suspected.
The Australian dollar was up 0.31% at $0.71840. The
kiwi rose nearly 0.85% to $0.5985 after hitting its
strongest level in more than three months, extending a recent
rally after the Reserve Bank of New Zealand suggested rate hikes
were likely.
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