NEW YORK/LONDON - The U.S. dollar extended gains against major currencies amid skepticism that recent diplomatic efforts will quickly de-escalate the Iran-Israel conflict.
Although the White House claimed progress with a 15-point proposal sent to Tehran, Iran denied direct talks, and fresh airstrikes between Israel and Iran kept investors cautious.
The dollar index climbed 0.23% to 99.41. The euro fell to $1.1585, and sterling dropped to $1.3387 despite UK inflation holding steady at 3% in February.
"The FX market is taking a different view than equities and bonds," said Shaun Osborne, chief FX strategist at Scotiabank. "If a real off-ramp were emerging, we’d see the dollar premium correct."
Equities and oil markets showed optimism-S&P 500 up 0.8%, crude down 3.8% to $100.54-but foreign exchange traders remained wary.
U.S. 10-year Treasury yields fell to 4.336%. The yen weakened as the dollar hit 159.05 yen, following Bank of Japan minutes signaling continued rate hikes.
Meanwhile, Fed funds futures now price in a slight chance of a December rate hike-reversing last week’s cut expectations-reflecting shifting global monetary sentiment.
Cryptocurrencies also rose: Bitcoin gained 1.77% to $71,300; Ether climbed 1.31% to $2,176.