A state of cautious calm prevailed in the currency markets on Thursday, as traders closely monitored the resilience of the ceasefire between the United States and Iran, just one day after its announcement triggered a broad decline in the dollar.

Persistent Tensions Keep Markets on Edge

The truce appeared fragile as Israel continued its parallel war against the Iranian-allied Hezbollah militia in Lebanon. Meanwhile, Tehran accused both Israel and the United States of violating the agreement, stating that moving forward with peace talks would be "unreasonable."

- The Strait of Hormuz remained closed to unauthorized vessels.

- Shipping companies reported they are awaiting further clarity before resuming transit, which pushed oil prices higher.

- President Donald Trump stated that all U.S. ships, aircraft, and military forces will remain in their positions within and around Iran until Tehran fully complies with the agreement.

This ambiguity kept currency markets in a state of tension and anticipation.

Major Currency Movements

- The Euro stabilized at $1.1661. It had risen by 0.6% on Wednesday before retreating later in the session after hitting a one-month high of $1.1721 earlier in trading.

- The British Pound saw a similar trend, stabilizing at $1.3393 after a 0.77% rise on Wednesday, retreating from its session high of $1.348.

- The Japanese Yen was slightly weaker, with the dollar rising 0.2% to 158.9 yen, after briefly dipping below the 158 yen level on Wednesday.

Derek Halpenny, Head of Research for Global Markets EMEA at MUFG Bank, noted that as long as the Strait of Hormuz remains closed, the "entire ceasefire agreement remains fragile." He added that while the dollar partially recovered, market movements remain limited. He further explained that the scheduled talks in Pakistan helped limit a total reversal of Wednesday's market moves.

Economic Data in the Background

While some global economic data was released, it remained secondary to war-related news.

- A government survey showed that consumer confidence in Japan declined in March for the first time in three months.

- This fuels concerns regarding the impact of the Middle East war on the economy, potentially complicating the Bank of Japan's decision on interest rate hikes.

- Bank of Japan Governor Kazuo Ueda told Parliament that real interest rates remain clearly negative, keeping financial conditions in the country accommodative.

The United States is expected to release Personal Spending data and the Personal Consumption Expenditures (PCE) index for February later on Thursday. However, since this data covers the pre-war period, it is unlikely to have a significant impact on the markets.

Relative Stability in Other Currencies

- The Swiss Franc remained stable at 0.7913 francs per dollar and 0.9228 per euro.

- The Australian Dollar declined by 0.3% to reach $0.7024.