Dollar Nears 10-Day Low on US-Iran Peace Deal; Oil Slides and Risk Assets Rally

The US currency edged lower to near its 10-day trough against major counterparts on Monday. Sentiment shifted notably following news of a preliminary peace framework between the United States and Iran, which drove down oil prices and lifted appetite for risk assets across global markets.

Diplomatic sources confirmed on last Sunday that officials from both nations have reached a deal blueprint to end ongoing conflict. The agreement includes suspending the US blockade on Iran and reopening the Strait of Hormuz. Brent crude futures lost more than 4% in reaction, settling at $83.82 per barrel.

Market sentiment remained guarded despite the de-escalation. In an interview with the New York Times on Sunday, President Donald Trump issued a stern warning: “

if Iran failed to reach a final nuclear accord with the United States, he would restart military attacks on Tehran or make the United States 'the guardian of the Middle East' in return for 20% of the region's revenues.”

Major currencies registered broad gains against the dollar. The euro traded at $1.1607, posting a 0.35% rise during Asian trading hours. British sterling advanced 0.3% to $1.3448. Risk-sensitive currencies also moved higher: the Australian dollar rose 0.50% to $0.7075, while the New Zealand dollar edged up 0.4% to $0.5854.

The US Dollar Index, which tracks the greenback against a basket of peer currencies including the euro and Japanese yen, fell 0.31% to 99.492, trading close to its weakest reading since June 5.

“I think we'll see the dollar fall over the course of the next few sessions. We'll probably see some of the risk currencies like Aussie and yen appreciate a little bit. But I don't think we're going to see any huge moves,” said Nick Twidale, chief market strategist at ATFX Global in Sydney.

“There's going to be a lot of wait and see, on how quickly the Strait really reopens and how long it's going to take for oil flow to really get back to normal. It's certainly going to be months rather than weeks.”

The Japanese yen weakened to 160.150 against the dollar, hovering around the 160 mark widely seen as a line in the sand for potential official intervention.

The Bank of Japan is set to raise interest rates to a 31-year high at the two-day meeting concluding on June 16, and signal its readiness to keep pushing up borrowing costs, undeterred by the temporary absence of its governor as it focuses on countering inflation risks from the Middle East war.

The decision would align the BOJ with other central banks shifting towards tighter policy, including the European Central Bank, which delivered a much-anticipated hike on Thursday.