BY COMFORT OGBONNA

Currency markets remained relatively calm on Thursday, but beneath the surface, uncertainty continued to dominate as traders closely monitored whether the fragile ceasefire between the United States and Iran would hold. The agreement, announced just a day earlier, had initially triggered a broad sell-off in the U.S. dollar, though movements since then have been more restrained.

Tensions in the region, however, suggest that the situation remains far from stable. Israel has continued its military operations in Lebanon against the Iran-aligned Hezbollah, raising doubts about the durability of the ceasefire. At the same time, Tehran has accused both Israel and the United States of breaching the agreement, warning that continuing peace negotiations under such conditions would be unreasonable.

Further complicating matters, the strategically vital Strait of Hormuz remains effectively closed to vessels without permits. Shipping companies have expressed hesitation about resuming operations until clearer assurances are provided, contributing to renewed upward pressure on oil prices and adding another layer of uncertainty to financial markets.

Donald Trump reinforced the cautious outlook by stating that U.S. military assets—including ships, aircraft, and personnel—would remain deployed in and around Iran until full compliance with any agreement is achieved. This stance has kept investors alert, as the risk of escalation still looms.

Against this backdrop, major currencies showed limited movement. The euro held steady at $1.1661 after gaining 0.6% the previous day, though it had earlier touched a one-month high of $1.1721 before retreating. The British pound followed a similar pattern, trading flat at $1.3393 after rising 0.77% on Wednesday but pulling back from earlier highs near $1.348.

The Japanese yen also reflected the cautious tone in markets. The dollar edged up 0.2% to 158.9 yen after briefly dropping below 158 in the prior session. Analysts noted that while the dollar has recovered slightly, overall currency movements remain modest given the scale of geopolitical uncertainty.

According to Derek Halpenny, head of research for global markets EMEA at MUFG, the closure of the Strait of Hormuz underscores how fragile the ceasefire remains. However, he also pointed out that the continuation of diplomatic talks, including scheduled discussions in Pakistan, has helped prevent more dramatic reversals in currency markets.

While geopolitical developments have taken center stage, economic data continues to play a secondary role. In Japan, consumer confidence declined in March for the first time in three months, signaling potential economic strain linked to rising global uncertainty and energy costs. Despite this, the yen showed little immediate reaction.

Comments from Kazuo Ueda added further context, as he noted that real interest rates in Japan remain clearly negative, ensuring that financial conditions stay accommodative. This stance suggests that the Bank of Japan is likely to proceed cautiously when considering any future rate hikes.

In the United States, upcoming data on personal spending and the Personal Consumption Expenditures (PCE) index is expected to attract attention. However, since the data reflects a period before the recent escalation in the Middle East, its immediate impact on markets may be limited.

Elsewhere, other major currencies remained broadly stable. The Swiss franc held steady at 0.7913 per dollar and 0.9228 per euro, while the Australian dollar slipped 0.3% to $0.7024.

Overall, currency markets are maintaining a fragile balance. While volatility has eased compared to the immediate aftermath of the ceasefire announcement, underlying tensions and unresolved geopolitical risks continue to keep traders cautious, with any new developments likely to trigger swift market reactions.