Dollar ticks up amid safe haven demand as Iran rejects U.S. ceasefire proposal

The U.S. dollar ticked higher on Wednesday, reversing course from earlier losses, as Middle East de-escalation hopes were tempered slightly after Iran rejected a proposed U.S. ceasefire.

At 17:45 ET (21:45 GMT), the US Dollar Index, which tracks the greenback against a basket of six currency peers, added 0.2% to 99.62.

U.S. offers up ceasefire proposal

Despite optimism that Washington and Tehran could be attempting to find a path to halting fighting, traders have retained a modicum of caution as both sides present conflicting depictions of the state of negotiations. 

With President Donald Trump reportedly keen to find an off-ramp from the war, the U.S. is said to have presented Tehran with a 15-point peace plan. Along with demands for Iran to dismantle its main nuclear sites, the U.S. is also calling for the reopening of the Strait of Hormuz, a vital waterway south of Iran that has been effectively closed to tanker traffic for weeks, driving up energy prices and threatening to ignite inflationary pressures in countries around the globe.

"Bullishness was reactivated last night by the report of a concrete set of terms and conditions being presented to Iran by the U.S. But we do not expect a ceasefire imminently. Rather, an intensification of military action by the U.S. as it tries to nudge Iran toward making important concessions is likely over the next two weeks, before major combat operations succeed, perhaps in mid-April. The War may now enter its third phase - of ’talk and fight’, rather than talk only, or fight only," Thierry Wizman, global FX & rates strategist at Macquarie, said. 

"The Bottom Line is that the prospect for a restart of negotiations means that the U.S.-Iran conflict could enter a more consequential phase. First, it was about diplomacy. Then, it was about the War. Now, it will be about the ’dualism’ of diplomacy and War. That may better protect market sentiment than War alone. But it also sets us up for a greater decline if it doesn’t work to provide stability and security," Wizman added.

Iran pushes back

The Fars News Agency on Wednesday morning reported that Iran does not accept the ceasefire. Fars added that Iran wanted a full end to the war, not just a ceasefire.

Later, Iran’s Press TV said the country would not allow the U.S. to dictate the timing of the end of the war, citing a senior political official. The state-owned agency said the official outlined five demands from Tehran’s side, including an end to all attacks and international recognition and guarantees on Iran’s right to exercise authority over the Strait of Hormuz.

Axios later reported that the U.S. had yet to receive any official message from Iran rejecting the ceasefire proposal, citing a U.S. official.

Iran’s Foreign Minister Abbas Araghchi said there were no talks with the U.S., Reuters reported. The minister added that the U.S. was sending messages through different mediators, but that such an exchange "does not mean negotiation."

Brent crude futures, the global benchmark, briefly fell back below the $100 a barrel threshold on Wednesday, but remains well above levels of roughly $70 a barrel before the outbreak of the war in late February.