The Dollar weakened against major currencies on Monday as optimism over a possible deal to reopen the Strait of Hormuz pushed oil prices below $100 per barrel, despite both the US and Iran downplaying the likelihood of a near-term agreement.
At the same time, trading activity was lighter than usual as several major markets, including the US, Hong Kong, the UK, and much of Europe, remained closed for public holidays.
Against the Yen, the Dollar slipped 0.2% to 158.94 Yen, while the Euro climbed 0.31% to $1.1639 and the British Pound advanced 0.42% to $1.34865.
The Australian Dollar climbed 0.5% to $0.7162, while the New Zealand Dollar gained 0.37% to $0.58685.
Furthermore, the US Dollar index slipped around 0.2% to 99.059, Reuters reports.
As diplomatic efforts to end the Iran conflict continued, US Secretary of State Marco Rubio said Washington would either secure a good agreement with Iran or deal with the country “another way.”
Iran’s foreign ministry spokesperson said many issues under discussion in a potential memorandum of understanding with the US had reached a conclusion, but stressed that this did not mean Tehran was close to signing a deal.
Oil prices fell sharply on hopes that a peace agreement could eventually be reached, with Brent crude dropping 4.5% to $98.9 per barrel, while US West Texas Intermediate declined 4.4% to $88.98 per barrel.
Over the weekend, mixed signals emerged regarding a possible peace agreement. On Saturday, US President Donald Trump said on social media that a memorandum of understanding with Iran had been “largely negotiated,” with both countries and mediators in Pakistan indicating progress in the talks.
However, on Sunday, Trump wrote on Truth Social that the US blockade on Iranian ships in the Strait of Hormuz would “remain in full force and effect until an agreement is reached, certified, and signed.”
Markets have become accustomed to waiting patiently for a concrete breakthrough, but expectations that a deal will eventually be reached remain strong. Developments over the weekend reinforced that view, even though the timing is still uncertain.
If Brent crude falls toward $90, it could provide renewed support for risk assets, as short-term inflation expectations ease and market pricing for 2027 interest rate hikes is scaled back.
Moreover, European Central Bank policymaker Yiannis Stournaras said on Monday that if eurozone inflation temporarily but significantly exceeds the ECB’s target, monetary policy should be cautiously adjusted in a more restrictive direction.
Meanwhile, traders are focusing on key upcoming data releases this week, including the US ADP employment report on Tuesday and eurozone confidence surveys on Thursday.