Dollar rises but still not far from pre-war levels, await data

By Stefano Rebaudo

May 12 (Reuters) - The U.S. dollar extended gains for a 2nd consecutive league connected Tuesday, underpinned by sustained uncertainty implicit the Middle East struggle that drove investors into the greenback arsenic a accepted harmless haven.

The greenback ‌rose sharply successful March arsenic the currencies of oil-reliant economies specified arsenic Japan and the euro country were heavy sold ‌after lipid prices surged pursuing Iran’s effectual closure of the Strait of Hormuz.

It weakened again aft April 7, the commencement of a ceasefire, which Donald Trump threatened connected Monday ​to end, dismissing Iran's connection arsenic "a portion of garbage." The greenback present stands adjacent to its pre-war levels.

“It appears improbable that a breakthrough would beryllium achieved earlier the Trump-Xi acme aboriginal this week,” said Mohit Kumar, an economist astatine Jefferies.

Trump is expected to get successful Beijing connected Wednesday, wherever Iran is acceptable to beryllium among the topics discussed with Chinese President Xi Jinping.

CRUDE OIL PRICE SUPPORTING DOLLAR

“As agelong arsenic crude lipid prices enactment ‌high, due to the fact that of the U.S.' blockade [of Iranian ports] ⁠and Iran's menace to tanker postulation successful the Gulf, the dollar volition enactment strong,” said Thierry Wizman, planetary forex and rates strategist astatine Macquarie Group.

“The toll that precocious lipid prices volition instrumentality connected the remainder of ⁠the world's economies volition beryllium overmuch much pernicious than the toll [on] the U.S.,” helium added.

Oil prices roseate 2% connected Tuesday arsenic hopes for a woody to extremity the warfare connected Iran faded. [O/R]

Wizman besides argued that the U.S. medication has astir apt decided that its economical blockade of Iran -- the 'economic war' -- could beryllium ​more ​effective than resuming bombing runs.

The U.S. dollar index, a measurement of its worth ​against a handbasket of large overseas currencies, was up ‌0.35% astatine 98.30. It was astatine 97.85 connected February 27 and deed 100.64 successful precocious March. It fell beneath its pre-war levels precocious past week.

RATE OUTLOOK IN FOCUS

Investors are besides intimately watching the monetary outlook, with the Federal Reserve present expected to support rates higher for longer to tackle inflationary pressures, portion traders are betting that the European Central Bank volition hike its depo complaint to astir 2.75% by year-end from the existent 2%.

The euro fell 0.33% to $1.1744.

Eyes volition beryllium connected a U.S. ostentation study owed aboriginal successful the session, which is forecast ‌to amusement that user prices roseate 0.6% past period aft jumping 0.9% successful ​March, according to a Reuters survey of economists. Estimates ranged from a 0.4% summation ​to a 0.9% rise.

The information could reenforce the presumption that ​the Federal Reserve is apt to support involvement rates unchanged successful the adjacent term. Traders person priced retired ‌the imaginable of complaint cuts for the twelvemonth compared ​to the 2 cuts expected earlier ​the Iran warfare broke out.