- Traders are cautious over efforts to end Iran war
- Dollar nudges higher, euro steady
- Yen slightly lower after BOJ minutes
LONDON/SINGAPORE, March 25 (Reuters) - Currency markets took a breather on Wednesday, with traders cautious over the possibility of an imminent de-escalation in the U.S.-Israeli war with Iran.
While U.S. President Donald Trump told reporters at the White House that the U.S. was making progress in talks with Iran, Tehran denied that direct negotiations have taken place, keeping investors on edge.
Reports also said that the U.S. had sent a 15-point plan for discussion to Tehran. Meanwhile, Israel and Iran exchanged airstrikes.
The U.S. dollar index , which measures the greenback's strength against a basket of six currencies, was last around 0.16% higher at 99.343, with the euro a touch lower at $1.1596.
The British pound was broadly steady at $1.3399 as data showed that British consumer price inflation held at an annual rate of 3% in February, unchanged from January's rate. However, inflation is broadly expected to pick up as the war in the Middle East pushes up prices.
"FX markets right now are in limbo. We're waiting to see what happens with these U.S.-Iran peace negotiations. Until we get some more clarity one way or the other, we would expect markets to continue tracking sideways," Nick Rees, head of macro research at Monex, said.
"We're waiting for the next catalyst, but we can't see it yet."
Subdued currency markets contrasted with a pickup in equities and a fall in crude oil prices, with Brent crude futures last around 5% lower at roughly $95 per barrel.
"For those reacting to every breaking headline around dialogue between the U.S. and its allies and Iran, including speculation of high-level talks and temporary ceasefire proposals, an element of fatigue is now firmly setting in," said Chris Weston, head of research at Pepperstone Group Ltd in Melbourne.
Against the yen , the U.S. dollar was up 0.16% at 158.94 yen after the release of minutes from the Bank of Japan's January policy meeting showed many board members saw the need to keep raising interest rates without any specific pace in mind.
The Australian dollar weakened 0.4% to $0.6965 after the release of inflation data for February, which showed a 3.7% rise prior to the start of the U.S.-Israeli war with Iran, a slightly slower pace than expected by analysts.
Although markets still anticipate no change in U.S. interest rates this year, expectations of policy tightening are rising. Fed funds futures now imply a small chance of a 25-basis-point hike at the Federal Reserve's December meeting, compared to a cut expected a week ago, according to CME Group’s FedWatch tool.
The Fed may need to keep interest rates steady "for some time" before further cuts are warranted, Fed Governor Michael Barr said on Tuesday, noting continued inflation above the Fed's 2% target and the risks posed by the conflict in the Middle East.
Bond markets rebounded after a volatile week, with the yield on the U.S. 10-year Treasury bond down 6.6 basis points at 4.326%.
In cryptocurrencies, bitcoin climbed 2.09% to $71,528.23, while ether was up 1.73% at $2,185.09.
Reporting by Gregor Stuart Hunter in Singapore and Sophie Kiderlin in London; Editing by Shri Navaratnam and Muralikumar Anantharaman
Source: Reuters