Dollar hangs near six-week lows as investors bet on Iran peace deal

By Jiaxing Li and Rae Wee

HONG KONG, April 16 (Reuters) – The U.S. dollar held near its lowest level since early March against major currencies on Thursday, as the White House’s optimism over a peace deal with Iran buoyed sentiment and encouraged traders to shed safe-haven positions.

President Donald Trump said the U.S.-Israeli war on Iran was “close to over,” while the White House expressed optimism about a deal, saying more in-person talks would likely take place in Pakistan again.

A source briefed by Tehran told Reuters Iran could consider allowing ships to sail freely through the Omani side of the Strait of Hormuz if a deal was reached to prevent renewed conflict.

The euro briefly strengthened past $1.18 and was on track for a nine-day winning streak. Sterling last traded at $1.3569, up about 0.2% for the day. Both hovered near their highest levels since before the Iran war began in February.

The dollar index, which measures the currency’s strength against six major peers, was steady at 98.018. It declined for eight straight sessions through Wednesday to give up most of the gains sparked by the war, as a tentative ceasefire revived appetite for riskier currencies.

“Markets are now basically looking past the conflict and pricing that there’s going to be some kind of settlement,” said Khoon Goh, the head of Asia research at ANZ.

“As markets are pricing out the war premium, we could see the dollar coming under further pressure and resuming the downtrend that has been established since basically last year.”

A break below the 98 level, a key near-term support, could open up potential for further downside, he said. The index is down 0.7% for the week, poised for its second straight week of declines.

The offshore yuan traded at 6.8156 yuan per dollar, hovering near a three-year high. The onshore yuan last bought 6.8169 to the dollar.

Data showed China’s economy grew 5.0% in the first quarter, beating analysts’ expectations, picking up speed on strong exports and policy support, but cooling retail sales add urgency to Beijing’s efforts to revive sluggish domestic consumption.

The yuan has firmed 2.6% against the dollar this year, as booming exports push up China’s currency and companies convert their dollar holdings to yuan.

“RMB stability is likely to persist,” said Christopher Wong, strategist at OCBC in Singapore. “In fact, since the onset of the Iran war, the RMB is the best-performing FX, outperforming even the USD. We are expecting RMB to continue its path of measured appreciation.”

The risk-sensitive Australian dollar strengthened to a four-year high of $0.7193. New Zealand dollar traded at $0.59170 to near one-month high.

Australian employment rose broadly in line with expectations in March, prompting markets to maintain bets on a roughly 70% chance the Reserve Bank of Australia will raise rates for a third time this year in May.

The Japanese yen firmed to 158.38 after the country’s finance minister said Japan and the U.S. agreed to intensify communication on exchange rates after her meeting with U.S. Treasury Secretary Scott Bessent on Wednesday.

(Reporting by Jiaxing Li in Hong Kong and Rae Wee in Singapore; Editing by Thomas Derpinghaus and Kim Coghill)