NEW YORK: The US dollar fell on Monday, reversing earlier gains, on optimism that a ceasefire deal in the Iran war will be reached despite renewed tensions between Washington and Tehran over the weekend.
A US-Iran ceasefire appeared in jeopardy on Monday after the US said it had seized an Iranian cargo ship that tried to run its blockade. Tehran vowed to retaliate and refused for now to join new peace talks.
Vice President JD Vance and the US delegation are set to land in Pakistan within hours for talks on Iran, President Donald Trump told the New York Post in an interview on Monday, adding that he would be willing to meet with Iranian leaders himself if progress is made.
“The market seemed to have had a knee-jerk panic reaction to the weekend developments when it first opened last night.
But the price action since then has leaned towards a bit of a relief and a renewed sense of hope for a resolution,” said Eric Theoret, a foreign exchange analyst at Scotiabank.
The euro was last up 0.12 percent at USD1.1776 after hitting a one-week low of USD1.1726 earlier in the session, while sterling was up 0.12 percent to USD1.353.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.33 percent to 98.13. It earlier reached a one-week high of 98.47. The index is down 1.75 percent in April. It had surged 2.27 percent in March on safe-haven demand after the war broke out.
“We reached a peak of fear in late March and we’ve been slowly recovering,” Theoret said.
Now in its eighth week, the war has created the most severe shock to energy supplies ever, sending oil prices surging because of the de facto closure of the Strait of Hormuz, which typically handles about a fifth of the world’s oil shipments. The US has maintained a blockade of Iranian ports, while Iran has lifted and then reimposed its own blockade on marine traffic passing through the waterway.
The Japanese yen strengthened 0.02 percent against the greenback to 158.62 per dollar and remained below the crucial 160 level that traders worry could lead to intervention to support the Japanese currency.