Strategist: Trump orders lockdown of Hormuz Strait, the US dollar strengthens, but upward potential may be limited.

After the negotiations between the US and Iran fell into a stalemate over the weekend, US President Trump ordered the blockade of the Strait of Hormuz, triggering a rise in market risk aversion and pushing the US dollar higher. On Monday, the Bloomberg Dollar Spot Index rose by 0.5% at one point, before narrowing to about 0.1%, but still on track to record its second consecutive trading day of gains this month. Among the major currencies, the Japanese yen led the decline in G10 currencies, showing significant weakness against the US dollar. Market participants believe that this move is more seen as a negotiation strategy rather than a long-term policy shift. The head of forex strategy at TD Securities stated, "Despite the increased uncertainty, the dollar's gains have been relatively modest, and the market views this action as a negotiation chip." Meanwhile, the outlook for energy transportation through the Strait of Hormuz continues to be a focal point for the market. As the strait plays a crucial role in global oil and natural gas transportation, the blockade has heightened global energy supply concerns, keeping oil prices near the $100 per barrel mark. Analysts point out that compared to direct attacks on Middle East energy infrastructure, a maritime blockade has a relatively manageable impact on the global economy, but it will still raise oil prices and exacerbate inflation pressures. However, most opinions believe that there is limited room for further significant strengthening of the US dollar. Strategists point out that since the conflict erupted at the end of February, the US dollar has been supported by safe-haven demand and improved trade conditions, but as the negative effects of high oil prices on the global economy become more evident, this support may weaken. In terms of fund flows, data from the US Commodity Futures Trading Commission shows that speculative funds have raised their long positions on the US dollar to a 14-month high as of early April. However, surveys from US banks indicate that fund managers have covered their short positions on the dollar, but remain cautious about further increases, suggesting that the geopolitical conflict support for the dollar may be temporary. Additionally, against a backdrop of simultaneous inflation pressures and economic growth risks, the market widely expects the Federal Reserve to refrain from raising interest rates in the short term, limiting the upside for the US dollar. Analysts caution that if the tight energy supply situation persists, the impact on the global economy will deepen, posing a risk for the US dollar to strengthen once again.