Soaring oil prices ignite stagflation concerns; the US dollar remains steady while the Japanese yen rebounds under intervention threats

1. The US dollar remained largely stable on Monday, but is set to record its largest monthly increase since July, as investors worry about the long-term impact of ongoing war in the Middle East. This month has seen continued market turmoil, with the conflict effectively blocking the Strait of Hormuz, pushing Brent crude oil prices towards their largest monthly gain and disrupting global interest rate expectations.2. Although Iran warned it is prepared to respond if the United States launches ground military actions, Pakistan stated it is still ready to host "substantial talks" aimed at ending the conflict in the coming days. US President Trump claimed the US and Iran have been in dialogue, and said Iran's new leader is "rational", but investors reacted indifferently to these remarks.3. The US dollar weakened slightly during Asian trading hours; the euro traded in a narrow range, currently hovering around 1.1511, and is likely to fall 2.5% in March, marking its worst monthly performance since July. The pound remained mostly steady and is expected to decline 1.5% this month. Analysts note that traders are still maintaining a defensive stance, with the strategy of selling risk assets on rallies.4. The market focus remains on oil prices, with Brent crude rising about 59% in March so far, setting a record for the largest monthly gain. Elevated oil prices have revived inflation concerns, prompting US interest rate futures to begin reflecting the possibility of a Federal Reserve rate hike later this year, which stands in sharp contrast to earlier expectations of a rate cut.5. The yen rebounded against the US dollar to 159.70, after earlier hitting 160.47, its lowest level since July 2024. Officials from Japan's Ministry of Finance issued the strongest intervention warning to date, stating that if speculative activity continues in the foreign exchange market, authorities are ready to take "decisive" action.6. The Australian dollar once fell to a two-month low against the US dollar, with a potential decline of about 3.5% in March, marking the largest monthly drop since December 2024. The New Zealand dollar has fallen 4.2% so far this month. Analysts say central banks are facing a dilemma: price data supports policy tightening, while signs of economic growth require caution, which is a hallmark of stagflation.