The dollar extended its weakness against major currencies on Friday and was on track to end the week lower, following reports that the U.S. and Iran reached an agreement to extend the ceasefire in the Middle East and lift restrictions on shipping through the Strait of Hormuz. The deal, still awaiting Trump’s approval, aims to extend the truce for an additional 60 days and facilitate the flow of traffic through the strategic waterway while negotiators address challenging matters such as Iran’s nuclear program, according to four sources.
Oil prices declined, and the demand for the safe-haven dollar diminished; however, these movements were moderated as investors exercised caution regarding a sustainable resolution, given the mixed signals emanating from both Washington and Tehran earlier in the week. The euro was valued at $1.1653, reflecting a modest increase of 0.03% in the Asian market, whereas the pound remained unchanged at $1.3445. The Australian dollar remained stable at $0.7164, while the New Zealand dollar experienced a 0.2% increase to $0.5946, approaching its highest level in over two weeks.
The dollar index, which measures the greenback against a basket of currencies, remained largely unchanged at 98.997 following a 0.2% decline on Thursday. It is poised to break a two-week streak of gains, concluding the week with a decline of 0.3%.It might well be that once this crisis in Iran, in the Middle East, is behind us, we expect the U.S. dollar to remain weak,” said Massimiliano Castelli. The conflict has momentarily halted the depreciation of the dollar, driven by a surge in demand for safe-haven assets; however, a significant number of investors continue to express a strong interest in diversifying away from U.S. dollar holdings, he stated.
The Japanese yen strengthened to 159.27 due to broad dollar weakness, distancing itself from the psychologically significant 160-per-dollar level that has previously prompted interventions by Japanese authorities. On the data front, U.S. inflation increased at its fastest pace in three years in April, driven by higher energy prices due to the Iran war and reinforcing the consensus among analysts that the Federal Reserve will maintain interest rates at current levels well into next year.