Expected talks between the US and Iran are suppressing risk aversion, causing risk currencies to strengthen while the USD/JPY exchange rate is under pressure.

Notice, the US dollar and the Japanese yen came under pressure on Tuesday as investors prepared to buy higher-risk currencies and hoped for an agreement between the United States and Iran to reopen Gulf shipping; at the same time, high inflation figures boosted the New Zealand dollar. With the ceasefire agreement set to expire this week, the prospects for peaceful negotiations between Iran and other parties remain uncertain, as Tehran has yet to decide how to proceed with diplomatic efforts after recent tensions escalated. However, investors believe that both sides have the motivation to reach an agreement. US President Trump stated that negotiations are progressing "fairly quickly" and will result in terms more favorable than previous agreements. As of the time of writing, the euro was trading at 1.1782 against the US dollar, the British pound at 1.35225 against the US dollar, with both dropping by around 0.1% on the day. The risk-sensitive Australian dollar fell 0.1% in early trading to 0.7171 against the US dollar. The US dollar index, which tracks the US dollar against a basket of currencies including the Japanese yen and the euro, stabilized at 98.087 after declining by 0.2% on Monday. Currency strategist Carol Kong of the Commonwealth Bank of Australia said, "I think the negotiations between the two parties will be the key driver in the next 24 hours. The market is currently in a wait-and-see mode." She added that Trump seems eager to reach an agreement with Iran and quickly end the war, but this largely depends on the outcome of the negotiations. "We still see the US dollar facing two-way risks." Central bank actions are closely monitored. The Japanese yen against the US dollar remained stable at 158.955, continuing to fluctuate near the key level of 160, which traders see as a "line in the sand" for intervention. Five informed sources stated that the Bank of Japan may postpone a rate hike next week as the prospects of ending the Middle East conflict have become dim, creating uncertainty in the country's economic and price outlook. The New Zealand dollar rose by 0.3% to 0.59085 against the US dollar. The annual inflation rate in New Zealand remained at 3.1% in the first quarter, exceeding the central bank's target range, increasing the possibility of further rate hikes this year. Meanwhile in the United States, Kevin Warsh, Trump's nominee for Federal Reserve chairman, will tell lawmakers at Tuesday's Senate confirmation hearing that he is "committed to ensuring that the execution of monetary policy remains strictly independent." Market focus also remains on the US retail sales data for March, which analysts predict will see a significant increase of 1.4%.