Dollar hits 10-day low as US, Iran reach peace deal

The U.S. dollar weakened to its lowest point in 10 days against major global currencies on Monday, spurred by reports of a peace agreement between the United States and Iran. The news triggered a sharp decline in oil prices, with Brent crude futures falling more than 4 percent to $83.82, and simultaneously boosted demand for assets perceived as riskier. U.S. and Iranian officials confirmed on Sunday they had reached a framework agreement to end their conflict, halt the U.S. blockade on Iran, and reopen the Strait of Hormuz. Despite the positive market reaction, a degree of caution persists. U.S. President Donald Trump indicated to The New York Times on Sunday that failure to reach a final nuclear accord could lead to a resumption of military attacks on Tehran. Alternatively, he suggested the U.S. could act as "the guardian of the Middle East" in exchange for 20 percent of the region's revenues. In currency markets, the euro climbed 0.35 percent to $1.1607, and sterling rose 0.3 percent to $1.3448. The Australian dollar, a bellwether for risk appetite, gained 0.50 percent to $0.7075, while the New Zealand dollar was up 0.4 percent at $0.5854. The dollar index, measuring the greenback against a basket of currencies, fell 0.31 percent to 99.492, its weakest level since June 5. Nick Twidale, chief market strategist at ATFX Global in Sydney, predicted further dollar depreciation in the near term, with potential appreciation for currencies like the Australian dollar and Japanese yen, although he does not foresee dramatic shifts. "There's going to be a lot of wait and see, on how quickly the Strait really reopens and how long it's going to take for oil flow to really get back to normal. It's certainly going to be months rather than weeks," Twidale commented. Meanwhile, the Japanese yen weakened, trading around 160.150 against the dollar, a level closely watched for potential intervention. The Bank of Japan is expected to raise interest rates to a 31-year high at its upcoming meeting, signaling a commitment to combating inflation risks stemming from the Middle East conflict, aligning with global central banks like the European Central Bank which recently raised rates.

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I think we'll see the dollar fall over the course of the next few sessions. We'll probably see some of the risk currencies like Aussie and yen appreciate a little bit. But I don't think we're going to see any huge moves.