Dollar firms as fading Middle East ceasefire hopes lift safe-haven demand

By Laura Matthews and Alun John

NEW YORK/LONDON, March 26 (Reuters) - The dollar held steadfast against large currencies connected Thursday, arsenic fading hopes of Middle East de-escalation revived the hazard of a prolonged ‌energy daze and boosted safe-haven demand.

New U.S. jobless claims edged higher past week, signaling a ‌still-stable labour marketplace and giving the Federal Reserve country to support rates dependable portion watching war-related ostentation risks.

Stocks mostly fell and lipid prices ​advanced arsenic capitalist caution grew implicit the uncertain trajectory of diplomatic efforts, bolstering the dollar.

Iran's overseas curate said the state was reviewing a U.S. connection to extremity the warfare but did not mean to clasp talks.

"The wide code close present is simply a tide of benignant of disappointment washing crossed markets arsenic the prospects for a cease occurrence ‌in the Middle East fade," said Karl ⁠Schamotta, main marketplace strategist, astatine Corpay successful Toronto.

"Traders are inactive piling into safe-haven trades and bracing for a much protracted blockage successful the Strait of Hormuz and for an ⁠eventual overheat successful large economies arsenic elevated vigor prices hit."

The euro weakened 0.14% to $1.1542, and sterling slipped 0.09% to $1.3353.

The dollar besides roseate 0.05% connected the Japanese yen to 159.54 yen.

As the erstwhile day's optimism waned, lipid was past 4.16% higher astatine $106.47 a ​barrel. [O/R]

The ​U.S. is simply a nett vigor exporter, dissimilar the euro zone, ​Britain oregon Japan. U.S. markets are afloat ‌pricing 3 European Central Bank complaint hikes this year, and adjacent to doing truthful from the Bank of England arsenic well.

The ECB has "an option" to rise involvement rates astatine its adjacent gathering if warfare successful the Middle East raises the specter of an ostentation surge successful the euro zone, policymaker Joachim Nagel told Reuters.

However, Bank of England Deputy Governor Sarah Breeden said she saw little hazard of second-round ostentation effects from rising vigor prices ‌caused by the Iran warfare than from Russia's full-scale penetration of ​Ukraine successful 2022, owed to greater labour marketplace weakness.

"The broader ​central slope backdrop retains a hawkish tilt, with ​markets repricing the Fed toward astir 10 bps of tightening this year, a notable ‌shift from cuts being priced successful arsenic precocious ​as past week," said Uto ​Shinohara, elder concern strategist, astatine Mesirow Currency Management successful Chicago.

Against the Chinese yuan, the U.S. dollar roseate 0.15% to 6.915 yuan successful offshore trading.

U.S. President Donald Trump said helium volition conscionable Chinese President ​Xi Jinping connected May 14 and ‌15 pursuing a hold owed to the Iran war.

(Reporting by Laura Matthews successful New York and ​Alun John successful London; Additional reporting by Gregor Stuart Hunter successful Singapore; Editing by Thomas ​Derpinghaus, Barbara Lewis, Arun Koyyur, Colin Barr, William Maclean)