SINGAPORE: The dollar fell on Tuesday while the Australian and New Zealand dollars rose after U.S. President Donald Trump announced a ceasefire between Israel and Iran, in news that sent investors cheering and sparked a risk rally across markets.
Trump announced a complete ceasefire between Israel and Iran, potentially ending the 12-day conflict that saw millions flee Tehran and prompted fears of further escalation in the war-torn region.
There was no immediate comment yet from Israel. While an Iranian official earlier confirmed that Tehran had agreed to a ceasefire, the country’s foreign minister said there would be no cessation of hostilities unless Israel stopped its attacks.
Dollar firms as markets brace for Iran response to US attacks
The risk-sensitive Aussie got a lift and last traded 0.3% higher at $0.6480 as did the kiwi , which rose 0.3% to $0.5994.
Israel’s shekel rallied sharply too, as it jumped 1% 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.
“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 more longer-lasting peace deal.”
The dollar, which last week drew support from safe-haven demand, fell broadly in the wake of the news.
Against the yen, the greenback was down 0.37% at 145.60.
The euro rose 0.12% to $1.1592 and sterling advanced 0.11% to $1.3541.
The yen and euro benefited from the slide in oil prices as both the EU and Japan rely heavily on imports of oil and liquefied natural gas, while the United States is a net exporter.
Trump’s comments on his Truth Social site came after Iran launched a missile attack on an American air base in Qatar on Monday that caused no injuries, in a move which he dismissed as a “weak response” to U.S. attacks.
Adding to headwinds for the dollar were dovish comments from Federal Reserve policymaker Michelle Bowman, who said the U.S. central bank should consider interest rate cuts soon.
Bowman’s openness to cutting rates soon is supported by Fed Governor Christopher Waller, who said in a television interview last week he’d also consider a rate cut at next month’s meeting.
Against a basket of currencies, the dollar was little changed at 98.23, having declined more than 0.5% in the previous session.
“There appears to be increasing division among the ranks of the Fed board ahead of Fed Chair Powell’s testimony,” said Tony Sycamore, a market analyst at IG.
“The chance of a July rate cut… is still underpriced. I think it should be higher than that.”
Markets are now pricing in more than a 20% chance the Fed could ease rates in July, up from 14.5% a day ago, according to the CME FedWatch tool.
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.
In cryptocurrencies, bitcoin rose more than 1% to $104,939.26, while ether jumped 2.1% to $2,397.65, in a reflection of the positive risk sentiment.
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