Dollar falls on possible US-Iran ceasefire extension

NEW YORK: The dollar fell against other major currencies on Friday and was on track for its second consecutive week of losses after the US and Iran reportedly reached an agreement to extend their ceasefire and lift restrictions on shipping through the Strait of Hormuz.

US President Donald Trump said he would make a final decision on Friday over a deal with Iran to extend their ceasefire. That deal would extend the truce for another 60 days and allow traffic to flow through the strategic waterway while negotiators tackle difficult issues such as Iran’s nuclear programme, four sources told Reuters.

The dollar had rallied at the outbreak of the conflict, drawing safe-haven flows and benefiting from the US economy’s relatively limited exposure to energy-price inflation. But the greenback has since given back those gains as uncertainty over the war’s trajectory weighed on sentiment.

The euro was up 0.26 percent at USD1.1678 and was on track for a weekly gain, while the pound was up 0.23 percent against the dollar at USD1.3473.

The dollar index, which measures the greenback against a basket of currencies, was down 2 percent at 98.81, on track for a second straight week of losses.

Data on Thursday showed US inflation rising at its fastest pace in three years in April, driven by higher energy prices due to the Iran war and cementing economists’ views that the Federal Reserve will hold interest rates unchanged well into next year.

The Japanese yen traded at 159.22 per dollar, remaining near the traditionally significant 160 level that has historically prompted interventions by Japanese authorities.

The Australian dollar was up 0.41 percent at USD0.71915. The kiwi rose nearly 1 percent to USD0.59920, its strongest level in more than three months, extending a recent rally after the Reserve Bank of New Zealand suggested rate hikes were likely.