US Sanctions on Iran Send Dollar Soaring, FX Volatility Through the Roof
The expansion of US sanctions on Iran has boosted demand for the dollar and increased volatility in major currency pairs, such as USD/JPY, EUR/USD, and GBP/USD.
Despite initial resistance from the dollar due to strong US economic data and lower long-term Treasury yields, the greenback regained support as more details of the sanctions policy emerged.
The risk of disruptions to energy supplies and potential escalation in Middle East tensions have increased safe-haven demand for the dollar, while hawkish ECB expectations have supported the euro.
The key variables driving the foreign exchange market are currently concentrated in three areas: US sanctions on Iran, monetary policy from major central banks, and Japanese fiscal and currency-policy risks.