The dollar strengthened on Monday as peace talks between the U.S.A. and Iran collapsed and the U.S. Navy prepared to blockade Iranian ports. Meanwhile, the Hungarian forint rose after the centre-right Tisza Party defeated?Viktor Orban by a large margin in an election victory.

Both the euro and the British pound were up 0.2% at $1.1698 but still above their previous lows. The Australian dollar, which is more risky, was down 0.3% at $0.7052. Meanwhile the New Zealand dollar fell 0.1% to $0.5834. The U.S. Navy will begin blockingading Strait of Hormuz on Monday after President Donald Trump said that talks with Iran did not lead to an agreement to end the conflict, putting at risk a fragile ceasefire of two weeks. U.S. Central Command announced that U.S. Forces would start implementing the blocking of all maritime traffic into and out of Iranian ports at 10 a.m. ET (1400 GMT), Monday.

The dollar is up this morning, but not by the same magnitude as we saw earlier in the war, said Tommy von Bromsen of Handelsbanken. He added that the U.S.'s inability to implement sound policies could push investors away.

The war in the Middle East has driven energy prices up sharply, fueling fears of higher inflation and lower growth. Brent crude futures rose 7% to $102 per barrel on Monday.

Dollar has tended to benefit from tensions between Iran & the U.S., due to its status as a "safe haven" and limited exposure to energy price inflation imported by the U.S.

Both currencies are sensitive to changes in energy prices.

Goldman Sachs' Teresa Alves, an analyst, said: "Under the surface today's price movement looks less risk-driven and more driven primarily by shifts in relative terms of trade."

The latest data released by the Commodity Futures Trading Commission on Friday showed that the net long position of speculators in the U.S. Dollar increased in the last week. The CFTC data revealed that the net position in the euro had flipped for the first since March of last year.

HUNGARIAN forint rises After Viktor Orban, a veteran nationalist leader who had served 16 years as prime minister, lost his position to Peter Magyar and the Tisza Party in Sunday's election.

The dollar rose 2.4%, and the euro rose 2%.

The ING FX Strategist Frantisek taborsky said: "The constitutional majority allows for a'smooth transition of power for opposition, and a quicker path to unlocking EU Funds, which is the main focus for investors. 'Giving Hungarian Assets another reason to extend their rally,

The yen is weakening as the yields on Japan’s 10-year government bonds have risen 5.5 basis points, to 2.49%. This is the highest level in nearly three decades.

Kazuo Ueda, the Governor of the Bank of Japan, said that the economic and price developments are?moving in line with bank forecasts' but called for caution over the impact of conflict in the Middle East.

Analysts believe Ueda’s speech may be the last chance for the 'BOJ' to announce whether or not it will increase interest rates at the end of this month. Money market traders have priced in a tightening of about 7 basis points at the meeting on April 28, implying a 30% chance of an interest rate hike.

Nomura analysts wrote that "the risk of policy mistakes is relatively high in Japan, Europe and the United States. This means money will return to USD assets due to a lack of better options."

(source: Reuters)