SINGAPORE, March 25 — Currency markets showed signs of fatigue in Asian trade today, with traders cautious over US President Donald Trump’s efforts to bring an end to the war with Iran.

While Trump told reporters at the White House the US was making progress in talks with Iran, Tehran has denied that direct negotiations have taken place, keeping investors on edge.

The dollar made slight gains, as the euro fluctuated in choppy trade to be down 0.1 per cent at US$1.1599. The British pound was 0.1 per cent weaker at US$1.3396, while the New Zealand dollar slipped 0.3 per cent to US$0.5822.

The subdued volatility contrasted with a surge in equity futures and a plunge in crude oil prices after Trump said on Tuesday the US was making progress in its efforts to negotiate an end to the war.

“For those reacting to every breaking headline around dialogue between the US and its allies and Iran, including speculation of high-level talks and temporary ceasefire proposals, an element of fatigue is now firmly setting in,” said Chris Weston, head of research at Pepperstone Group Ltd in Melbourne.

Against the yen, the US dollar was up 0.1 per cent at ¥158.885, after the release of minutes from the Bank of Japan’s January policy meeting showed many board members saw the need to keep raising interest rates without any specific pace in mind.

The Australian dollar weakened 0.3 per cent to US$0.6976 after the release of inflation data for February, which showed a 3.7 per cent rise prior to the start of the US-Israeli war with Iran, a slightly slower pace than expected by analysts.

“It’s more likely than not that trimmed mean inflation will accelerate in the near term, partly as a result of second-round effects from the oil price shock,” analysts from Capital Economics wrote in a research report.

Although markets still anticipate no change in US interest rates this year, expectations of policy tightening are rising. Fed funds futures now imply a 15.7 per cent chance of a 25-basis-point hike at the Federal Reserve’s December meeting, compared to a 69.5 per cent probability of a cut a week ago, according to CME Group’s FedWatch tool.

The Fed may need to keep interest rates steady “for some time” before further cuts are warranted, Fed Governor Michael Barr said on Tuesday, noting continued inflation above the Fed’s 2 per cent target and the risks posed by the conflict in the Middle East.

Bond markets rebounded after a volatile week, with the yield on the US 10-year Treasury bond down 5 basis points at 4.338 per cent. “Higher oil prices added to expectations of increasing inflationary pressures and tighter monetary policy,” analysts from Westpac wrote.

The US dollar index, which measures the greenback’s strength against a basket of six currencies, was up 0.1 per cent at 99.317.

In cryptocurrencies, bitcoin climbed 1.1 per cent to US$70,855.49, while ether was up 0.7 per cent at US$2,162.01. — Reuters