Dollar Weakens as Hopes of a US-Iran Deal Dampen Safe-Haven Demand
The US dollar continued its decline against most major currencies on Friday (May 29th) and is set to close the week lower. Market sentiment improved after reports that the US and Iran had reached an agreement to extend the Middle East ceasefire and ease shipping restrictions in the Strait of Hormuz.
According to Reuters, the deal is still awaiting President Donald Trump's approval. If approved, the ceasefire would be extended for 60 days and shipping would be reopened in the Strait of Hormuz while negotiators discuss more difficult issues, including Iran's nuclear program.
The decline in oil prices also reduced demand for the dollar as a safe-haven asset. However, market movements remained subdued as investors remained uncertain about the deal's longevity, following mixed signals from Washington and Tehran throughout the week.
On the currency market, the euro traded around US$1.1653, while the pound remained relatively flat at US$1.3445. The Australian dollar held at US$0.7164 and the New Zealand dollar rose to US$0.5946, approaching its strongest level in more than two weeks.
The dollar index, which measures the greenback against a basket of major currencies, hovered around 98.997, after falling 0.2% on Thursday. On a weekly basis, the index is headed for a 0.3% decline, potentially snapping a two-week winning streak.
Data showed US inflation rose at its fastest pace in three years in April, driven by higher energy costs due to the Iran war. This condition reinforces the view that the Fed could keep interest rates high for longer, which typically supports the dollar. However, this session, easing geopolitical risks reduced the dollar's safe-haven appeal, leaving the market to consider whether the dollar's weakening trend will continue once Middle East issues subside. (asd)
Source: Newsmaker.id
