The US dollar traded near a one-week low in Asian market hours on Monday, as hopes for a deal to reopen the Strait of Hormuz drove oil prices below $100 a barrel, despite the United States downplaying the prospects of an imminent agreement with Iran.
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Against the yen, the dollar dipped 0.2% to 158.9 yen, while the euro rose 0.3% to $1.1636, and the British pound climbed 0.3% to $1.3476.
Many global markets are closed on Monday due to holidays, resulting in broadly thin liquidity.
The Australian dollar jumped 0.5% to $0.7162, and its New Zealand counterpart gained 0.4% to $0.5869.
"There are early signs that risk sentiment is finding support, as Sydney trading revealed a broad-based selloff of the US dollar, benefiting currencies closely tied to risk appetite, such as the Australian dollar," Westpac analysts wrote in a research note.
The US dollar index, which measures the greenback's performance against a basket of six major currencies, shed 0.1% during today's trading to reach 98.95, its weakest level since May 18.
Oil markets tumbled on hopes of a peace agreement, with Brent crude falling 5.4% to $97.91 a barrel, and US West Texas Intermediate (WTI) crude dropping 5.7% to $91.10 a barrel.
Mixed signals emerged over the weekend regarding the peace deal. US President Donald Trump stated on social media on Saturday that "a great deal of negotiation has been completed" on a memorandum of understanding for a peace agreement with Iran, with both countries and mediators in Pakistan reporting progress.
However, Trump remarked yesterday, Sunday, on the Truth Social platform that the US blockade of Iranian ships in the Strait of Hormuz "will remain fully in place and effective until a deal is reached, ratified, and signed." There has been no immediate response from the Iranian government.
In the markets, cautious optimism prevailed that a deal would eventually be hammered out.
"Markets are prepared to be incredibly patient awaiting a tangible breakthrough, but the base case scenario for an agreement remains intact, as the weekend news added further conviction, even if the timing remains unclear," said Chris Weston, head of research at Pepperstone Group in Melbourne.
In cryptocurrencies, Bitcoin rose 0.5% to $76,961.76, while Ether stabilized at $2,091.65.
Reuters
