USD/CNH rises to near 6.8800 due to safe-haven demand

• USD/CNH gains ground as the US Dollar advances on increased safe-haven demand linked to Middle East uncertainty.
• Trump said Iran’s ceasefire proposal was “not good enough” ahead of his Hormuz Strait deadline.
• The PBOC set the USD/CNY midpoint at 6.8854, higher than the 6.8773 estimate.

USD/CNH gains ground after registering modest losses in the previous session, trading around 6.8800 during the Asian hours on Tuesday. The pair appreciates as the US Dollar (USD) holds gains on increased safe-haven demand ahead of further developments on the Iran deadline by US President Donald Trump to open the Strait of Hormuz.

President Trump warned that he could target Iranian power plants and bridges unless his demands are met by 8:00 PM Eastern Time. Trump said on Monday that the latest proposal for a US ceasefire with Iran is “not good enough” ahead of his deadline for Iran to either reopen the Strait of Hormuz. “It’s not good enough, but it’s a very significant step,” Trump said, adding, “They’re negotiating now, and they’ve made a very significant step. We’ll see what happens.”

The Greenback receives support as Iran war surges energy prices, increasing fears of inflation revival and forcing the US Federal Reserve (Fed), to adopt a more hawkish stance. Traders are pricing in a delay of Fed rate cuts and could even raise borrowing costs later this year if inflationary pressures persist. Market participants are now looking ahead to the latest Federal Open Market Committee (FOMC) Meeting Minutes for clearer guidance on the central bank’s policy trajectory.

The People’s Bank of China (PBOC) set Tuesday’s USD/CNY reference rate at 6.8854, above the 6.8773 estimate, allowing the Yuan to trade within a +/-2% band around the midpoint.

Meanwhile, traders’ focus is shifting to Friday’s inflation data, with consumer prices expected to ease slightly, while producer prices are projected to post their first annual increase since 2022.