Dollar Falls Amid Ceasefire, US-Iran Talks to Dominate Market Attention

Market Sentiment Shifts as Ceasefire Holds in the Gulf

The dollar slipped on Friday, putting it on track for its largest weekly drop since January, as investors sold safe-haven assets on the assumption that oil shipping will resume if a ceasefire holds in the Gulf. The dollar had towered in March as one of the few bastions of safety as the Iran war sent oil prices surging and hit stocks and gold, while inflation worries pressured bonds.

| Currency | Weekly Change | | --- | --- | | Euro | 1.8% | | Sterling | 2% | | Australian Dollar | 2.9% | | New Zealand Dollar | 2.9% |

Since a fragile ceasefire was reached on Tuesday, those positions are being unwound. The euro has rallied 1.8% this week to trade at $1.173, while sterling has gained 2% since Monday to $1.347. The risk-sensitive Australian and New Zealand dollars are set for weekly rises of nearly 3% on the dollar, with the Aussie trading just above 70 cents.

The market still seems generally optimistic, despite some of the ceasefire fraying. Data on Friday showed that U.S. consumer prices rose by the most in nearly four years in March as the Iran war boosted oil prices and the pass-through from tariffs persisted. The increase was largely in line with expectations and the markets' direction is more likely to hinge on the outcome of weekend peace talks between the U.S. and Iran in Islamabad, analysts said.

The U.S. dollar index dipped 0.22% and was 1.6% lower so far this week. China's yuan, which has not fallen significantly since the Iran war began on February 28, was set for its biggest weekly rise in 15 months and is trading at its strongest levels since 2023. Data on Friday showed factory gate prices rose for the first time in three years, a sign that inflation may be beginning to take hold after a long period of deflation.

The yen, under pressure for years from Japan's low rates and more recently from its vulnerability to high oil prices, rose above its lows against the dollar - but not by much, and was sold against other currencies. The yen slipped to 159.255 per dollar on Friday.