US Dollar Index inches higher above 98.00 despite risk-on mood

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, halts its losing streak that began on April 6 and is trading around 98.20 during the European hours on Thursday.

The US Dollar (USD) receives some support as traders view the situation around the Strait of Hormuz as highly uncertain, with the waterway effectively restricted under a dual blockade. However, Tehran may allow vessels to transit via the Omani side if an agreement is reached to prevent renewed escalation in hostilities.

The Greenback may further depreciate on faded safe-haven demand amid growing expectations of a potential de-escalation in the Middle East conflict. US President Donald Trump stated that the war was “close to over.” A Bloomberg report highlighted speculation about a possible two-week extension of a ceasefire, although Trump downplayed the need for such a measure, pointing to ongoing negotiations aimed at ending the conflict.

Moreover, easing energy prices helped alleviate inflation concerns and reduced expectations of additional Federal Reserve (Fed) tightening. The Fed is broadly expected to keep interest rates unchanged this month and potentially through the remainder of the year.

Cleveland Fed President Beth Hammack said in a CNBC interview on Wednesday that the key issue to watch is how high energy prices climb and, more importantly, how long they stay elevated. Meanwhile, St. Louis Fed President Alberto Musalem noted that the oil shock driven by the Middle East conflict is likely feeding into core inflation, with expectations that it will remain close to 3% throughout the year.