The US Dollar extended its decline Monday following confirmation that the United States and Iran have reached an interim agreement to de-escalate conflict and reopen the Strait of Hormuz. MUFG analyst Lee Hardman flagged the currency weakness as markets responded to reduced geopolitical risk in the critical Middle Eastern shipping corridor. The strait handles roughly one-fifth of global oil traffic, and its closure had sparked concerns about supply disruptions and energy price spikes.
The agreement removes a significant tail risk that had supported safe-haven demand for the greenback in recent sessions. Traders are now repricing dollar positions as tensions ease and focus shifts back to fundamental economic factors. Currency pairs across the board are reflecting this sentiment shift, with risk-sensitive currencies gaining ground against the weakening dollar. Oil prices are also expected to moderate as supply chain fears diminish.
FXnCO Insight
Dollar shorts are gaining momentum as geopolitical premiums unwind—watch for continued weakness unless fresh safe-haven catalysts emerge.
Source: FXStreet