To update prices

By Hannah Lange

NEW YORK, April 6 (Reuters) - The dollar held steady on Monday, while the yen hovered near the critical 160 yen-to-the-dollar level as investors assessed the escalating trade war with Iran, with eyes on U.S. President Donald Trump's deadline for Iran to reopen the Strait of Hormuz.

In a profanity-laden social media post on Easter Day, Trump warned that he would order attacks on Iranian power plants and bridges on Tuesday if Tehran did not open the strategic waterway, specifying a more precise deadline of Tuesday at 8:00 PM Eastern Time (Wednesday 00:00 GMT).

However, investors are still weighing the possibility of a ceasefire after a media report indicated that negotiators are about to make a final attempt.

“Each new deadline makes the disruption look longer, more complicated and more negative at the macroeconomic level,” said Charu Chanana, chief investment strategist at Saxo Bank in Singapore.

The euro reached $ 1.1542 , while the pound sterling traded at $ 1.324 . The dollar index, which measures the performance of the US currency against six major currencies, held steady at 100. Liquidity is likely to remain thin with many Asian and European markets closed today.

The Australian dollar rose 0.49 percent to US$ 0.692 , hovering near its two-month low hit last week.

Global markets have been in turmoil since the outbreak of the US-Israeli war on Iran at the end of February, when Tehran effectively closed the Strait of Hormuz, through which about one-fifth of the world’s total oil and liquefied natural gas passes.

The closure of the Strait of Hormuz sent oil prices soaring above $100 a barrel, raising fears of higher inflation and upending expectations for interest rates worldwide. Concerns grew about the blow to economic growth, with the risk of stagflation increasing.

Traders no longer expect the Federal Reserve to cut interest rates until the second half of 2027, compared with an expectation at the beginning of the year of two cuts in 2026.

Yen movements

The Japanese currency weakened to 159.71 yen against the dollar, a level close to its lowest point in 21 months, which it reached last week, as traders watched for any signs of intervention from Tokyo following strong warnings issued by officials in recent days.

Japanese Finance Minister Satsuki Katayama warned currency traders on Friday, saying the government was prepared to take action against speculative trading in foreign exchange markets as volatility rose "significantly".

However, many doubt the effectiveness of any intervention at a time when geopolitical turmoil in the Middle East is fueling continued demand for the dollar as a safe haven. The yen has fallen 1.5 percent since the war began and remains stuck near the 160 yen-to-the-dollar level.

“The conditions appear unfavorable for Japanese officials to intervene to support the yen, and the market does not seem to have given up trying to reach the point where it might be forced to bear the consequences of such intervention,” said Mark Chandler, senior market analyst at Bannockburn Global Forex, in a research note.

Speculators have increased their short positions on the yen, with the latest weekly data showing short positions worth $5.7 billion, the highest level since July 2024, when Japan last intervened in the foreign exchange markets.