Dollar falls as Israel-Iran ceasefire triggers drop in oil prices
The U.S. dollar fell on Tuesday after President Donald Trump announced a ceasefire between Israel and Iran, in news that sparked a risk rally and a sharp drop in oil prices.
Trump announced a complete ceasefire between Israel and Iran, potentially ending the 12-day conflict that led millions of people to flee Tehran and prompted fears of further escalation in the war-torn region.
Israel has agreed to Trump's proposal, saying it has achieved its goal of removing Tehran's nuclear and ballistic missile threat.
The yen and euro benefited from a sharp fall in oil prices as both the European Union and Japan rely heavily on imports of oil and liquefied natural gas, while the U.S. is a net exporter.
Against the yen, the dollar was down 0.75 percent at 145.03 .
The euro rose 0.27 percent to $1.1609. It hit $1.1632 a couple of weeks ago, its highest level since October 2021.
Adding to the pressure on the dollar were dovish comments from Federal Reserve policymaker Michelle Bowman, who said the U.S. central bank should consider interest rate cuts soon, triggering a fall in U.S. Treasury yields.
Fed Governor Christopher Waller said in a television interview last week that he would consider a rate cut at next month's meeting as well.
Mohit Kumar, economist at Jefferies, said he expected the Fed to take more time before easing.
"We are not in the July camp, but do believe that data should show signs of weakness over the summer months and hence prompt a rate cut in September."
Trump said on Tuesday that U.S. rates should be lowered by at least two to three percentage points.
Markets are now pricing in close to a 23 percent chance the Fed could ease rates in July, up from 14.5 percent a day ago, according to the CME FedWatch tool.
Against a basket of currencies, the dollar was down 0.14 percent at 98.09, extending its more than 0.5 percent decline in the previous session.
Fed Chair Jerome Powell is due to testify before the U.S. Congress on Tuesday and Wednesday, where focus will be on the outlook for U.S. rates.
The risk-sensitive Australian dollar got a lift and last traded 0.7 percent higher at $0.6506 as did the New Zealand currency , which rose 0.75 percent to $0.6025.
In oil markets, U.S. traded crude lost about $10 a barrel in 24 hours after Iran carried out a token airstrike on a U.S. air base in Qatar and signalled a trade deal with Iran.
Israel's shekel rallied sharply too, jumping 1.5 percent against the dollar to its strongest level since February 2023.
"It's obviously positive news for risk sentiment," said Rodrigo Catril, senior currency strategist at National Australia Bank, of the announced ceasefire.
"We need to obviously have a bit more detail in terms of exactly what all this means ... I suppose it will be the conditions of the ceasefire, and what are the conditions for a longer-lasting peace deal."
In cryptocurrencies, bitcoin rose 2 percent to $105,832, while ether jumped 3.2 percent to $2,425, in a reflection of the positive risk sentiment.
