The dollar edged higher on Tuesday as investors doubted a quick end to the Middle East conflict, partly reversing Monday’s optimism-fueled market action.
Data released on Tuesday showed US business activity slowing to an 11-month low in March as the war raised energy and other input costs, reinforcing concerns that inflation could accelerate.
“I think that many people recognised what the US and Iranian officials say is part of the psych operations related to war,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York. “The market is less optimistic than it was yesterday. Broadly we’re consolidated within yesterday’s ranges.”
Sterling fell 0.51 per cent to US$1.3387 after jumping nearly 1 per cent on Monday, while the euro was last down 0.27 per cent against the dollar at US$1.1585 after gaining 0.4 per cent in the previous trading session.
Markets rallied Monday after US President Donald Trump said that the US and Iran had held “very good and productive” conversations about a “complete and total resolution of hostilities in the Middle East.” Iran denied it had engaged in any direct negotiations. Trump’s comment gave investors hope for a short war, but now markets seem to be taking a more measured tone.