Dollar drops as Trump ceasefire prompts risk-on turn for markets

SINGAPORE: The dollar sank to its lowest ​level in a month while the euro, yen, Aussie and kiwi ‌rallied hard in Asian trading on Wednesday after US President Donald Trump said he had agreed to a two-week ceasefire with Iran.

The yen strengthened 0.7% ​against the greenback to 158.50 per dollar. The euro was ​up 0.7% at $1.1677, while the British pound appreciated 0.8% to $1.3403.

The ⁠Australian dollar climbed 1.2% to $0.7063 and its New Zealand counterpart jumped 1.1% to $0.5795.

Trump ​had earlier threatened widespread attacks on Iran’s civilian infrastructure, drawing ​international condemnation after issuing an extraordinary warning that “a whole civilization will die tonight” if his demands were not met.

Investors’ risk appetite rapidly returned ​after the ceasefire announcement, less than two hours before Trump’s deadline for Tehran to ​reopen the Strait of Hormuz would have expired.

If the Strait is reopened, “we ‌could ⁠be able to consolidate the risk-on rally that we’re seeing,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.

“But a lot has to happen in the ​next 14 days,” ​he said, ⁠adding that currencies would be vulnerable to a retracement of their recent moves in ​the interim. “Markets still need to proceed with a ​degree ⁠of scepticism.”

The US dollar index , which measures the greenback’s strength against a basket of six currencies, weakened for a third consecutive ⁠day ​to 98.943, the lowest since March ​11.

Cryptocurrencies rallied, with bitcoin advancing 3.2% to $71,514.03, and ether climbing 5.7% to $2,235.35.