US dollar weakens after reports of US-Iran ceasefire agreement

The US dollar faced pressure against major currencies following reports of a preliminary agreement between the US and Iran to extend a ceasefire. This diplomatic move awaits final approval from President Donald Trump. According to New York trading data at 11:00 local time on Thursday (28 May), the Bloomberg Dollar Spot Index fell 0.2%, reversing gains from the previous session amid overnight clashes. Risk-sensitive currencies, such as the Swedish krona and New Zealand dollar, led gains among Group of 10 (G-10) currencies. Meanwhile, the euro rose and traded above $1.1650. Axios reported that the memorandum of understanding (MoU) between the US and Iran includes a 60-day ceasefire extension. The agreement paves the way for future negotiations on Iran’s nuclear program and guarantees unhindered passage through the Strait of Hormuz. sources cited two US officials and a regional participant in the negotiations. The draft requires Iran to ensure no disruptions or tolls in the Strait of Hormuz, including clearing mines within 30 days. Earlier, the dollar had already been under pressure following the release of key US inflation data. April’s Personal Consumption Expenditures (PCE) index rose 0.4% monthly, slightly below Bloomberg’s consensus estimate of 0.5%. Despite positive market reactions to the peace news, foreign exchange traders remain vigilant, waiting for concrete evidence of a sustainable agreement to determine the dollar’s direction in the coming weeks. ‘Given this agreement requires Trump’s final approval, I’m not certain we’re out of the woods,’ said Andrew Hazlett, currency trader at Monex Inc. ‘While a return to pre-conflict levels was anticipated, the market should await formal confirmation before celebrating,’ he added.