NEW YORK, May 26 : The dollar firmed on Tuesday as renewed U.S. strikes on Iran dented optimism for a near-term ceasefire, boosting demand for the greenback as investors turned cautious.Iran said the U.S. had violated a ceasefire after it conducted what it called defensive strikes in southern Iran, while U.S. Secretary of State Marco Rubio said that negotiating a deal to halt the conflict could "take a few days."Hopes for a peace deal had earlier pushed oil prices below $100 a barrel and eased demand for the greenback.But demand for the dollar has picked up slightly as investors grow less confident about a swift end to the conflict, said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
"It's pretty straightforward what happened: we go home over the weekend, thinking we're close to a ceasefire and now there are new hostilities. So I think the market is waiting for developments," Chandler said.The euro was down 0.15 per cent against the dollar at $1.16265. The dollar strengthened 0.29 per cent to 0.785 against the Swiss franc.The dollar index was up slightly 0.135 per cent at 99.15 after falling 0.3 per cent the previous day.Oil prices clawed back some of their losses at the start of trading on Tuesday on news of the U.S. strikes. Brent crude futures rose 3.89 per cent to $98.87 a barrel after dropping 7 per cent on Monday. [O/R] Data showed that U.S. consumer confidence eased in May as worries about inflation linked to the war with Iran intensified, offsetting an improvement in households' perceptions of the labor market."If you look at the rally in the stock market, which is a bit of catch up from yesterday, and oil prices - I'd say the market is a bit nervous. I think that's really the story. The economic data doesn't mean so much right now," Chandler added.The British pound fell 0.3 per cent to $1.3465.YEN WEAKENSThe shift in sentiment weighed on the Japanese yen, pushing it closer to the 160-per-dollar level that traders see as a potential trigger for intervention by Tokyo.The Japanese yen weakened 0.2 per cent against the greenback to 159.24 per dollar. Treasury yields fell sharply on Tuesday as U.S. markets returned from a holiday, catching up on a drop in global bond yields on expectations of a peace deal. The yield on benchmark U.S. 10-year notes fell 8 basis points to 4.493 per cent.The Australian dollar, often viewed as a proxy for risk, was 0.1 per cent down at $0.71675.The dollar strengthened 0.01 per cent to 6.784 versus the offshore Chinese yuan.
