Dollar pushes to one-week high

The US dollar rose ​to its highest level in a week against major currencies on Monday before paring gains as renewed US-Iran tensions and ‌fading hopes for a Middle East peace deal sent investors toward safe havens.

The United States said on Sunday that it had seized an Iranian cargo ship that tried to run its blockade, while Iran said it would retaliate, stoking fears about a resumption of hostilities.

Tehran also said it would not participate in a second ​round of negotiations that the US had hoped to kick off before its two-week ceasefire with Iran expires on Tuesday.

“The weekend escalation ​revives the geopolitical risk premium just as markets had started pricing a peace dividend,” said Charu Chanana, chief investment strategist at Saxo, adding that higher oil “is not just an energy story, it is a growth-and-rates story.”

The euro was last down ​0.05 percent at $1.1754 after hitting a one-week low of $1.1729 earlier in the session, while sterling was 0.15 percent lower at $1.3497. The risk-sensitive Australian dollar fell 0.3 percent ​to $0.7145.

The dollar index , which measures the US currency against six peers, recouped some of its recent losses to rise to its highest in a week at 98.47, before dipping to trade at 98.34.

The index is down 1.55 percent in April. It had surged 2.3 percent in March on haven demand after the war broke out.

Analysts said ​the restrained moves in the currency markets, with the dollar giving back some of its early gains, pointed to lingering optimism that despite ​the setbacks over the weekend a resolution could still be on the cards.

Chris Weston, head of research at Pepperstone, said while the tone is risk-off to ‌start ⁠the week, the move so far “appears orderly rather than indicative of a major volatility shock.”

“Market participants understand that the path to a formal agreement was unlikely to be linear and remains vulnerable to sudden changes, so market players won’t be wholly surprised by a sentiment shift,” Weston said.