The US Dollar Index may experience an increase as traders incorporate the Federal Reserve’s hawkish policy outlook into their pricing strategies. The Greenback may weaken as the easing of safe-haven demand follows an initial peace agreement between the US and Iran. CENTCOM has removed all maritime restrictions on traffic moving to and from Iranian ports and coastal waters. The US Dollar Index, which measures the value of the US Dollar against six major currencies, remains flat after two days of gains and is trading around 100.83 during the Asian hours on Friday.

The Greenback may further advance as traders price in the hawkish sentiment surrounding the Federal Reserve policy outlook. In his inaugural press conference, newly appointed Federal Reserve Chairman Kevin Warsh underscored that “price stability” continues to be the Fed’s paramount guiding principle. The Federal Open Market Committee reached a unanimous decision on Wednesday to maintain its benchmark overnight borrowing rate within the range of 3.5%–3.75%. However, the decision conveyed a hawkish sentiment, with nearly half of the officials indicating that at least one rate increase might be necessary later this year.

The US Dollar may face challenges amid easing safe-haven demand, which could be attributed to the United States-Iran initial agreement. The deal has initiated a 60-day negotiation period aimed at reaching a final agreement to conclude the conflict, according to source. Additionally, the US military earlier confirmed it had ended its blockade on Iranian ports near the Strait of Hormuz, as officials assert that millions of barrels are once again flowing through this crucial waterway. Positive developments surrounding the US-Iran peace deal could enhance the appeal of riskier assets, including the shared currency, in the near term.