The US dollar fell to a 10-day low against major currencies on Monday after a preliminary accord to conclude the conflict between the United States and Iran caused oil prices to drop sharply and lifted appetite for higher-risk assets.
US and Iranian officials announced on Sunday that they had reached a basic framework to end hostilities, lift the American embargo on Iran and restore access to the Strait of Hormuz.
The memorandum is due to be formally signed on Friday in Switzerland, yet uncertainty remained while markets awaited further details and talks on Iran’s nuclear activities continued.
Oil prices declined, with Brent crude futures falling more than 4 percent to 83.82 dollars, as the safe-haven dollar weakened amid easing geopolitical strains and lower inflation worries.
The euro rose 0.3 percent to 1.1601 dollars in Asian trading, while sterling gained 0.2 percent to 1.3434 dollars.
The Australian dollar climbed 0.6 percent to 0.7079 dollars and the New Zealand dollar advanced 0.4 percent to 0.5854 dollars.
The dollar index stayed near 99.55 after touching its lowest level since June 5 earlier in the session.
Analysts expect the dollar to decline further in coming sessions, with risk-sensitive currencies such as the Australian dollar and yen likely to strengthen modestly.
Attention now turns to the pace at which the Strait of Hormuz reopens and oil shipments return to normal levels, a process expected to take months.
The Japanese yen weakened to 160.225, remaining close to levels that could prompt official intervention.
Major central banks, including the Federal Reserve, Bank of Japan and Reserve Bank of Australia, will announce policy decisions this week. Markets will assess whether the peace framework reduces inflation pressures and alters tightening plans.
The Federal Reserve is expected to leave rates unchanged in the 3.5-3.75 percent range on Wednesday, with focus on any signals from the new chair.
Investors now see roughly a 50 percent chance of a rate increase by December, down from over 70 percent a week earlier.
The Reserve Bank of Australia is also projected to hold its cash rate at 4.35 percent on Tuesday after three hikes this year.
