This week saw weaker dollar on ceasefire headlines - unwinding positioning rather than risk-on shift given uncertainty. Bottom line for dollar is Strait of Hormuz reopening and oil supply returning.

If oil prices remain sustainably higher next couple months, different story.

US policy uncertainty in 2025 driving USD weakness; US economy has challenges; still expect 3 Fed cuts in H2; fiscal outlook not amazing especially defense spending.

Push and pull, but policy uncertainty creates downward pressure on dollar.

This is a supply shock; headline inflation will pick up but wages show disinflationary trend. Fed will look through - previous oil shocks show headline inflation stabilizes after a year.

Oil prices don't sustainably stay high long in oil shock; demand story comes into play and prices stabilize at lower levels, maybe higher than pre-conflict but not sustainable at $100+.

Inflationary impact top of mind but Japan imports 90% energy, knows how to manage risks. Import inflation picking up impacts yen.

Even taking away supply shock, demand-driven inflation picking up in Japan, wages up - points to BOJ hiking at upcoming meeting.

Near term, dollar firmness may continue few weeks, dollar-yen moving higher. Yen weakness from negative terms of trade shock.

Intervention unlikely soon unless speculative flows; need to differentiate if move from macro fundamentals like import costs/energy-driven inflation.