HONG KONG, March 17 - Global currency markets edged lower on Tuesday as traders assessed escalating tensions in the Middle East and shifting inflation expectations. The U.S. dollar strengthened slightly, supported by rising oil prices from ongoing conflict between the U.S. and Iran.
The euro fell 0.12% to $1.1492, while sterling dipped 0.1% to $1.33. The dollar index held near 99.91. The Australian dollar weakened to $0.706, down 0.16%, ahead of the Reserve Bank of Australia's meeting.
Markets now price a 78% chance of a 25-basis-point rate hike by the RBA, reflecting growing pressure to respond to supply shocks. Analysts warn policy divergence among central banks could emerge as inflation risks intensify.
The Japanese yen slipped to 159.35 against the dollar-near the critical 160 level-despite government warnings. Rising oil prices are straining Japan’s import-dependent economy, fueling concerns over trade deficits and inflation. Authorities face tough choices: defend the yen or protect bond markets.