The Canadian dollar weakened to 1.37 per USD, extending the pullback from the seven-week high of 1.358 on April 30th following weak domestic labor data. Net employment in Canada unexpectedly fell by 17K jobs in April and the unemployment rate rose to a six-month high of 6.9%, strengthening bets that the BoC will prioritize economic growth and refrain from tightening policy further this year. At the same time, stronger-than-expected US labor data boosted expectations that the Federal Reserve could keep interest rates elevated for longer, backing the preference for the greenback instead of the loonie for North American investors. Meanwhile, investors continued to monitor developments in the Middle East after renewed US-Iran hostilities raised uncertainty over prospects for a deal that could restore oil supply from the region and ease energy inflation.

Canadian Dollar Weakens on Underwhelming Labor Data

The euro extended gains above $1.175, reaching its strongest level since April 20, buoyed by optimism over a potential resolution to the Iran conflict. US President Donald Trump confirmed that the ceasefire with Iran remains in effect, while Tehran stated it is still reviewing a US proposal to end the conflict. US Secretary of State Marco Rubio added that Washington expects Iran’s response soon. Meanwhile, Trump warned the EU that the US would impose "much higher" tariffs on EU goods unless the bloc eliminates its tariffs on US products by July 4. Money markets are pricing in at least two rate hikes by the ECB this year, with a more than 75% probability of a first increase in June. ECB President Christine Lagarde noted on Friday that the central bank is prepared to act swiftly if needed and that the euro area’s economic starting position ahead of the energy shock is more favorable than it was before Russia’s invasion of Ukraine.

Euro Rises on Iran Ceasefire Hopes

The Mexican peso rose to 17.2 in May, approaching the strongest in two years after the Bank of Mexico stated that it was done with its interest-rate cutting cycle. The central bank reduced its benchmark policy rate by 25bps to 6.5% in a narrow decision, compared to expectations of more consensus for a cut, but signaled that it concluded the easing cycle that began in March of 2024. Banxico delivered the clear statement as elevated energy prices due to the war in the Middle East threaten inflation expectations in the Mexican economy. This supported the continuation of the peso carry trade, supporting the currency despite downside risks to growth. The last GDP data pointed to a sharper contraction than expected of 0.8% in Q1.

Mexican Peso Holds High After Banxico Decision

The pound climbed above $1.36, reaching its strongest level since mid-February, as Prime Minister Keir Starmer vowed to stay in office despite early election results showing significant losses for his Labour Party. Nigel Farage’s Reform UK gained ground in English council elections, while Labour lost hundreds of seats, though the decline was less severe than some of the worst-case forecasts. Many results are still expected to be announced after markets close today and into the weekend. Meanwhile, optimism over a potential US-Iran peace deal eased concerns that persistent inflation could keep interest rates elevated for longer, after President Trump maintained that the ceasefire remained "in effect" despite recent clashes. Financial markets continue to anticipate two Bank of England rate hikes by year-end.

Sterling Strongest Since Mid-February as PM Starmer Holds On

The dollar index fell below 98 on Friday, reaching its lowest level in ten weeks, despite stronger-than-expected US labor data that reinforced views the economy remains resilient amid the energy shock caused by the Iran conflict. US nonfarm payrolls increased by 115,000 in April, well above expectations for a 62,000 rise, marking a second consecutive monthly gain for the first time in nearly a year. The unemployment rate held steady at 4.3%. Markets are now weighing solid economic data against expectations that the Federal Reserve will remain cautious as higher energy prices continue to fuel inflation risks. President Donald Trump said the month-long ceasefire with Iran was still holding despite renewed clashes involving US and Iranian forces. Investors remain focused on the Strait of Hormuz, which has been largely closed since the war began, while Tehran has yet to respond to Washington’s proposal to reopen the key trade route.

DXY Falls to 10-Week Low

The South African rand traded around 16.4 per USD, close to the highest in over two weeks, amid a softer dollar and rising prices of key precious metals prices, particularly gold. Optimism over a potential US–Iran peace deal persisted despite fresh tensions in the Middle East, after President Trump assured the ceasefire was still in effect. The rand has fallen over 3% since the conflict erupted in late February, reflecting concerns over the impact on inflation and growth. The South African Reserve Bank has maintained a hawkish posture, prioritizing inflation control above all else. Governor Lesetja Kganyago recently signaled that the central bank will respond to any persistent inflationary pressures stemming from the Middle East conflict, while reiterating its strong commitment to the 3% target. March inflation stayed near the target at 3.1%, but rising fuel and electricity costs, coupled with higher food prices linked to fertilizer shortages, pose upside risks in the coming months.

South African Rand Hovers Around 2-Week Highs

The dollar index edged slightly lower to below 98 on Friday, hovering around pre-war levels, as traders continued to assess developments in the Middle East. Uncertainty persists over how quickly the US and Iran can reach an agreement to end the conflict, after US forces struck missile and drone launch sites and other military assets in Iran that Washington said were linked to attacks on three US warships transiting the Strait of Hormuz. Still, President Trump said the ceasefire remains in effect. Meanwhile, investors are also awaiting today’s jobs report for fresh signals on the health of the labor market. The Federal Reserve is widely expected to keep interest rates unchanged through the remainder of the year. The greenback was mostly stronger against the pound after local election results reinforced expectations of significant losses for the Labour Party. On the week, the dollar index was little changed.

Dollar Little Changed to End the Week

The euro traded above $1.17, approaching its strongest level since April 20, as markets turned more hawkish on the European Central Bank’s policy outlook amid renewed inflation concerns. Brent crude oil prices rose back above $100 per barrel after clashes between the US and Iran near the Strait of Hormuz, raising fears of further instability in the region’s fragile ceasefire. Meanwhile, US President Donald Trump warned the European Union that he would impose "much higher" tariffs on EU goods unless the bloc eliminates its tariffs on US products by July 4. Money markets are pricing in over 50 basis points of ECB tightening, or at least two rate hikes, by year-end, with a more than 75% chance of a first increase in June. Several ECB officials have recently signaled a higher likelihood of rate hikes due to persistent inflation pressures.

Euro Nears Three-Week High on ECB Hike Expectations

The pound climbed toward $1.36, close to an over two-month high, as investors assessed the fallout from UK local and devolved government elections and the growing instability in the Middle East. Early election results showed Nigel Farage’s Reform UK gaining traction in English councils, while Prime Minister Keir Starmer’s Labour Party lost nearly half the seats it was defending, though the decline was less steep than some had feared. The Conservative Party also faced significant losses, surrendering over a quarter of its seats, while the Greens nearly doubled their count and the Liberal Democrats made progress. At the same time, geopolitical tensions intensified after Washington and Tehran exchanged fire in southern Iran, pushing Brent crude prices back to $100 a barrel, despite President Trump’s assertion that the ceasefire was still "in effect." Markets are pricing in roughly 60 bps of Bank of England rate hikes, equivalent to at least two increases, before year-end.

Sterling Gains Slightly as Investors Digest Election Results

The rupiah weakened toward IDR 17,390 per dollar on Friday, extending prior losses, as the U.S. dollar firmed amid renewed hostilities between Washington and Tehran around the Strait of Hormuz. Pressure also mounted after April data showed Indonesia’s forex reserves fell for a fourth straight month to their lowest in nearly two years, underscoring fragile external buffers. Meanwhile, risks from Middle East tensions to energy costs and supply chains remain even as  April inflation stayed manageable. Bank Indonesia’s interventions and tighter safeguards, including stricter oversight of corporates with heavy forex needs and lower caps on dollar purchases without documentation, helped steady the currency through the week. Even so, the rupiah has shed almost 4% year-to-date, ranking among Asia’s weakest. Strains had already been building before the Gulf conflict escalated in late February, as investors flagged fiscal vulnerabilities and transparency concerns in local capital markets.

Rupiah Under Strain After Forex Reserve Data

The Indian rupee weakened to around 94.5 per dollar, reversing part of a two-day recovery, as renewed US-Iran hostilities in the Strait of Hormuz drove oil prices higher. The escalation, marked by exchanges of fire and accusations of ceasefire violations, reignited concerns over potential disruptions to a key global shipping route, prompting a sharp rebound in Brent crude to around $101.50 per barrel. Higher oil prices pressured the rupee through India’s elevated energy import exposure, with recent gains unwound as volatile crude prices drove position adjustments across the FX market. Persistent structural dollar demand also continued to weigh on the currency, while central bank measures aimed at stabilising the rupee offered only limited support. Market participants said a sustained recovery would depend on stability in oil prices and moderation in related dollar outflows.

Indian Rupee Weakens on Oil Prices Jump

The Japanese yen traded near 157 per dollar on Friday and was set to end the week little changed, as intervention fears and fresh verbal warnings from Tokyo failed to sustain the recent rally. Japan’s top currency diplomat said on Thursday that the country has no limits on how frequently it can intervene in currency markets and maintains daily communication with US authorities. The yen had initially surged on April 30 amid suspected intervention, with another bout of movement seen on May 6, although the Ministry of Finance has not confirmed any official action in the foreign exchange market. Meanwhile, data showed that Japan’s real wages rose for a third consecutive month in March, reinforcing expectations that the Bank of Japan could continue tightening policy. On the external front, the yen faced renewed pressure from a stronger US dollar as clashes between the US and Iran in the Strait of Hormuz kept geopolitical tensions elevated.

Yen Set to End Week Little Changed

The New Zealand dollar hovered around $0.593 on Friday, after losing some ground in the prior session as renewed US-Iran tensions weighed on sentiment. The US military launched strikes on Iranian military targets on Thursday in response to attacks on its three destroyers in the Strait of Hormuz, adding fresh uncertainty to prospects for a peace deal. Still, investors focused on signs that the US is seeking to de-escalate tensions, while also awaiting Iran’s response to a proposal to reopen the strait. Meanwhile, the jobs report released earlier this week showed mixed results and had little impact on rate expectations. Traders see only a 34% chance of a rate hike later this month, though a July increase remains fully priced in as rising energy costs fuel inflation concerns. The RBNZ said the financial system remains resilient amid heightened global risks, though warned of a slower economic recovery that could weigh on employment. The kiwi is on track for its second straight weekly gain.

New Zealand Dollar Holds Decline

The New Zealand dollar hovered around $0.594, remaining near an over two-month high as investors assessed the latest developments in the Middle East. The US military launched strikes on Iranian military targets on Thursday in response to attacks on its three destroyers in the Strait of Hormuz, adding fresh uncertainty to prospects for a peace deal. Still, investors focused on signs that the US is seeking to de-escalate tensions, while also awaiting Iran’s response to a proposal to reopen the strait. Meanwhile, the jobs report released earlier this week showed mixed results and had little impact on rate expectations. Traders see only a 34% chance of a rate hike later this month, though a July increase remains fully priced in as rising energy costs fuel inflation concerns. The RBNZ said the financial system remains resilient amid heightened global risks, though warned of a slower economic recovery that could weigh on employment. The kiwi is on track for its second straight weekly gain.

New Zealand Dollar Trades Near 2-Month Highs

The South Korean won weakened to around 1,464 per dollar, pulling back after touching a more than two-month high, as renewed US-Iran tensions triggered risk-off sentiment across Asian markets. The confrontation saw both sides exchange fire in the Strait of Hormuz, raising concerns over potential disruptions to global oil supplies, while pushing Brent crude above $100 per barrel and strengthening the US dollar as investors sought safe-haven assets. The move prompted broad USD demand and profit-taking across regional currencies, with the won among the weaker performers. Meanwhile, downside pressure was partly cushioned by strong external fundamentals, after South Korea posted a record current account surplus in March driven by a surge in semiconductor exports. Expectations of sustained AI-led chip demand and a resilient trade balance continued to provide structural support, even as short-term flows remained dominated by geopolitical risk and dollar strength.

South Korean Won Weakens on Geopolitical Tensions

The US dollar index climbed above 98 on Friday, maintaining gains from the previous session as renewed clashes between the US and Iran in the Strait of Hormuz kept geopolitical risk elevated. Three US Navy destroyers transiting the strategic waterway reportedly intercepted Iranian attacks and carried out retaliatory strikes, although President Donald Trump said the ceasefire remains in effect. The Trump administration is still awaiting Iran’s response to a proposal aimed at reopening Hormuz and bringing an end to the nearly 10-week conflict, with reports suggesting Tehran is expected to reply via Pakistan within the next two days. Investors are also focused on the upcoming April jobs report, which is expected to show the US economy added 62K jobs last month, down from 178K in March, while the unemployment rate is projected to remain steady at 4.3%. Despite Friday’s strength, the dollar is on track to end the week broadly unchanged against most major currencies.

Dollar Firms Up on Hormuz Clashes

The Australian dollar held its recent decline around the $0.72 level after pulling back from multi-year highs, leaving it on track for a broadly flat performance over the week. Attention remains on geopolitical developments, as renewed clashes between the US and Iran weakened hopes for a near-term peace agreement. The latest escalation heightens tensions as the US attempts to exit a conflict now in its third month, while awaiting Iran’s response to its proposal to reopen the Strait of Hormuz, a vital waterway for energy flows. The near-closure of the strait and the resulting energy price shock have fueled concerns about rising inflation, which could keep interest rates higher for longer. In Australia, markets are pricing around a 20% chance of another rate hike in June by the Reserve Bank, after 75 basis points of tightening to 4.35% over the past three meetings. The probability rises to about 68% for August, with a terminal rate near 4.60% almost fully priced in by September.

Aussie Dollar Eyes Flat Weekly Outcome

The Canadian dollar weakened toward the 1.635 mark per USD from the seven-week high of 1.358 on April 30th, losing some ground due to the outlook of a dovish Bank of Canada and lower crude oil prices. The US stated that it was close to reaching a peace deal with Iran that would restore oil supply through the Strait of Hormuz. The resulting decline in crude oil prices limited the outlook of foreign exchange inflows to Canada due to lower turnover on oil exports. Meanwhile, the latest round of GDP data flagged a slowdown in the economy following the start of the war, supporting the Bank of Canada's dovish tilt in its guidance, opting to prioritize growth as inflation was not yet entrenched. Preliminary GDP data reflected a stall from the previous month in March despite higher energy output.

Canadian Dollar Steady on Lower Oil and Dovish Outlook

The Mexican peso strengthened to 17.2 per USD in the first week of May, reaching its strongest level since late February, as softer oil prices and easing inflation expectations weighed on the US dollar and supported market sentiment. Investors also awaited the Bank of Mexico’s monetary policy decision, with markets widely expecting another interest rate cut. Inflation in Mexico slowed for the first time this year to 4.45% in April from 4.59% in March and the economy contracted by 0.8% in Q1 026, a sharper decline than forecasts for a 0.5% drop, signaling broad-based weakness across the economy. Manufacturing and services both posted steep contractions, while extractive industries also declined despite higher oil and silver prices. The weak economic data reinforced expectations that Banxico will continue its monetary easing cycle this year, after the central bank unexpectedly cut interest rates in March despite persistent inflationary pressures.

Mexican Peso Strengthens Ahead of Banxico Decision

The Russian Ruble touched 74.26 against the USD, the highest since May 2023. Over the past 4 weeks, US Dollar Russian Ruble lost 5.24%, and in the last 12 months, it decreased 9.68%.

Russian Ruble Hits 35-month High

The euro climbed toward $1.18, its highest level since April 20, as the US dollar’s safe-haven demand waned amid growing hopes for a US-Iran agreement. Washington proposed a one-page memorandum to Iran, detailing steps to reopen the Strait of Hormuz and lift the US blockade on Iranian ports, with investors awaiting Tehran’s response. Money markets have reduced expectations for European Central Bank rate hikes, now pricing in about 50 basis points of tightening, or two rate hikes, by year-end, with a 75% chance of a first increase in June. ECB board member Piero Cipollone recently stated that the likelihood of a rate hike had risen due to persistent inflation pressures, a view shared by other policymakers earlier this month.

Euro Nears $1.18 on US-Iran Deal Optimism

The British pound rose above $1.36, hitting its highest level since mid-February, as the US dollar’s safe-haven demand eased amid optimism over a potential US-Iran agreement to end hostilities. Washington sent Iran a one-page memorandum outlining steps to gradually reopen the Strait of Hormuz and lift the US blockade on Iranian ports, with investors now awaiting Tehran’s response. Meanwhile, voters across England, Scotland, and Wales cast ballots today in elections that will determine control of the Scottish and Welsh parliaments and over half of England’s councils. The vote is a key test for Prime Minister Keir Starmer, with polls suggesting Labour may face setbacks after policy missteps and tax hikes. On monetary policy, markets now expect about 50 basis points of tightening, equivalent to two rate hikes, by the end of the year, down from earlier projections of up to three.

Sterling Holds at Over Two-Month High on US-Iran Hopes

The South Korean won fell half a percent to around 1,454 per dollar on Thursday, trimming some gains but remaining near its strongest level in over two months, as investors booked profits after the recent rally. The currency had strengthened recently on improved global risk sentiment and robust domestic equity performance. Despite the modest pullback, broader support remained intact as signs of progress in US–Iran peace negotiations helped limit demand for the dollar and supported Asian currencies overall. Korea’s strong external position also continued to provide structural support, with record first-quarter exports led by semiconductors, where shipments surged 139% year-on-year on strong AI-driven demand. At the same time, strength in the KOSPI, which remains near record highs, helped sustain expectations of equity-related inflows, keeping the won broadly supported.

South Korean Won Trims Gains

The Indonesian rupiah hovered around IDR 17,360 per dollar on Thursday after briefly touching 17,425 in the previous session. The local currency found some support as the U.S. dollar slipped further on reports that Washington and Tehran are drafting a new proposal to end the Middle East conflict, easing haven demand. Locally, President Prabowo approved seven new Bank Indonesia measures to bolster the currency, including halving the cap on undocumented dollar cash buying to USD 25,000 and requiring resource exporters to place 50% of forex earnings in domestic banks from June 1. However, the rupiah has fallen almost 4% this year, with skepticism over policy effectiveness persisting even as the central bank has held rates steady since October. On the trade front, March’s surplus was not supported by export growth, but driven by falling imports. Shrinking forex reserves also weighed on sentiment, despite Governor Perry Warjiyo saying they remain sufficient to support stabilisation efforts.

Rupiah Gets Boost From Central Bank Policy Measures

The Indian rupee strengthened to around 94.7 per dollar, rebounding from record-low levels near 95.2, supported by plunging oil prices. The rupee posted its strongest one-day gain in a month as markets reacted to reports of progress in US–Iran negotiations aimed at easing geopolitical tensions and potentially establishing a framework for de-escalation. That development triggered a sharp 7% drop in Brent crude, briefly easing concerns over India’s import costs and external balance, while also driving gains across Asian currencies in a broader risk-on shift. Additional support came from a softer US dollar backdrop, as easing Treasury yields and improved risk sentiment encouraged modest selling across emerging markets. Meanwhile, oil volatility remained central as prices fell on renewed optimism before partially recovering on mixed political signals.

Indian Rupee Rebounds from Record Lows

The offshore yuan strengthened to around 6.80 per dollar on Thursday, extending its rally for a third straight session and reaching its strongest level since February 2023, as risk sentiment firmed amid growing optimism over a potential diplomatic breakthrough between Washington and Tehran. Reports indicated that the US and Iran are close to finalizing a one-page memorandum designed to halt weeks of hostilities, paving the way for the reopening of the Strait of Hormuz, easing disruptions to oil flows, and improving global growth prospects. Investors are also watching a highly anticipated summit next week between Trump and Chinese President Xi Jinping, previously postponed amid heightened geopolitical tensions tied to the Middle East war. Meanwhile, China’s financial regulator reportedly told major lenders to suspend new financing to five refineries sanctioned by the US over alleged Iranian oil ties, contrasting with earlier guidance from Beijing urging firms to ignore US sanctions.

Offshore Yuan Extends Rally to Over 3-Year High

The Australian dollar rose above $0.72, reaching a new four-year peak as growing expectations of a Middle East peace deal weakened the safe-haven US dollar, while disappointing domestic trade figures weighed on sentiment. Australia unexpectedly recorded a goods trade deficit of AUD 1.84 billion in March, its first in over eight years, as imports of data centre computing equipment surged, while fuel shipments also jumped on higher prices driven by the Iran conflict. Elsewhere, the greenback remained under pressure after reports that the US and Iran are moving toward formally ending the conflict, potentially reopening the Strait of Hormuz and paving the way for further nuclear talks. The Aussie also continued to benefit from a rate hike this week from the Reserve Bank of Australia, which lifted the cash rate to 4.35%. Markets now see only a 20% chance of another move in June after three rate hikes this year, while a further increase toward 4.60% by September remains fully priced.

Australian Dollar Notches New 4-Year Peak

The Japanese yen traded around 156 per dollar on Thursday after rising about 1% overnight, in moves markets largely attributed to suspected intervention from Tokyo. The Ministry of Finance has not confirmed any official action in the foreign exchange market, though Finance Minister Satsuki Katayama recently warned of “decisive measures” against speculative trading, keeping authorities on high alert during the Golden Week holidays. The yen had initially surged as much as 3% on April 30 ahead of the holiday period, before easing back amid a lack of sustained policy follow-through. Externally, the currency also drew support from a weaker US dollar, as expectations of a potential US-Iran agreement to end the war reduced safe-haven demand for the greenback. At the same time, a sharp drop in oil prices helped ease inflation concerns, lowering expectations that the US Federal Reserve would need to adopt a more restrictive interest rate stance.

Yen Strengthens on Suspected Intervention

The dollar index slipped below 98 on Thursday, extending losses from the prior session as markets priced in rising expectations of a US-Iran agreement to end the war. Reports indicated that both sides are nearing a one-page, 14-point memorandum of understanding aimed at formally ending the conflict, potentially reopening the Strait of Hormuz, and laying the groundwork for more detailed nuclear negotiations. However, President Trump cautioned that no deal has yet been finalized, warning that military strikes could resume if Tehran fails to comply. Oil prices dropped sharply on easing geopolitical risk, helping to reduce inflation concerns and temper expectations that central banks will need to maintain restrictive policy for longer. Still, Chicago Fed Bank President Goolsbee struck a cautious tone, noting that inflation has not continued its descent toward the US Federal Reserve’s 2% target and has instead picked up since the start of the conflict.

Dollar Weakens on Middle East Peace Prospects

The Chinese Yuan touched 6.81 against the USD, the highest since February 2023. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.39%, and in the last 12 months, it decreased 6.02%.

Chinese Yuan Hits 3-year High

The New Zealand dollar hovered around $0.595 on Thursday after rallying more than 1% in the previous session to its highest level in over two months, as mounting hopes of a US-Iran peace deal boosted risk appetite. Reports suggest that both sides are close to finalizing a one-page memorandum aimed at ending their conflict, potentially paving the way for the gradual reopening of the Strait of Hormuz. Meanwhile, domestic labour market data showed mixed results and had little impact on the rate outlook. The unemployment rate edged lower, coming in slightly below expectations, while employment growth missed forecasts. Traders are implying only a 34% chance of a rate hike later this month, although a July increase remains fully priced in amid inflation concerns tied to higher energy prices. The Reserve Bank of New Zealand said the financial system remains resilient despite heightened global risks, though it warned of a slower economic recovery that could weigh on employment.

New Zealand Dollar Holds at Over 2-Month High

The Brazilian real strenghten to 4.91 per USD, its strongest level in more than two years, as investors continued to favor Brazilian assets amid high domestic interest rates and strong foreign inflows. The Central Bank of Brazil maintained a cautious tone after recent monetary easing, signaling that persistent global uncertainty and tighter international financial conditions could limit the pace of future rate cuts. Support for the Brazilian currency also came from resilient exports of oil, iron ore, soybeans, coffee, and beef, which continued to generate strong trade surpluses and steady dollar inflows. Meanwhile, expectations that the US Federal Reserve could gradually ease policy later this year, reinforced by falling oil prices, weakened the dollar broadly. Oil prices declined after reports that the White House was nearing a preliminary agreement with Iran aimed at ending the conflict and reopening the door to broader nuclear negotiations.

Brazilian Real Extends Rally

The dollar index fell to 97.7 on Wednesday, returning to pre-war levels, as growing optimism over a potential resolution to the conflict with Iran weighed on the currency. Hopes of a deal triggered a sharp drop in oil prices, helping to ease inflation concerns. Axios reported that the White House believes it is close to reaching an agreement with Iran on a preliminary memorandum of understanding to halt the war and pave the way for more detailed nuclear negotiations, citing US officials and other sources. In addition, the US said its offensive operations against Iran had concluded and announced a temporary pause in “Project Freedom.” The decline in oil prices further reduced fears of renewed inflationary pressures, pressuring the greenback across major currencies. Meanwhile, the yen outperformed, strengthening more sharply amid renewed speculation of possible intervention by Japanese authorities.

Dollar Back to Pre-War Levels

The British pound climbed above $1.36, reaching its strongest level since mid-February, as the US dollar’s safe-haven appeal faded amid growing optimism over a potential US-Iran agreement. According to Axios, the White House is close to a one-page Memorandum of Understanding with Iran to end the conflict and begin nuclear negotiations, the closest the parties have been to a deal since the conflict started. Tehran is expected to respond within 48 hours, though no agreement is finalized. Investors also focused on Britain’s municipal elections on Thursday, with polls suggesting Prime Minister Keir Starmer’s Labour Party might face a significant setback. On monetary policy, financial markets now price in about 50 basis points of tightening, equivalent to two rate hikes, by year-end, down from up to three hikes priced in earlier this month.

Pound Hits Over Two-Month High Amid US-Iran Deal Hopes

The euro extended its gain toward $1.18, reaching its strongest level since April 20, as the US dollar’s safe-haven appeal faded amid growing optimism over a potential US-Iran agreement. According to Axios, the White House is close to a one-page Memorandum of Understanding with Iran to end the conflict and begin nuclear negotiations, the closest the parties have been to a deal since the conflict started. Tehran is expected to respond within 48 hours, though no agreement is finalized. Money markets have scaled back bets on European Central Bank rate hikes, now expecting the deposit facility rate to reach around 2.6% by December, reflecting two fully priced hikes, with a 75% chance of a first increase in June. On Wednesday, ECB board member Piero Cipollone said the likelihood of a rate hike had risen due to persistent inflation pressures, echoing similar remarks from other policymakers earlier this month.

Euro Gains Ground Amid US-Iran Deal Optimism

DXY decreased to 97.63, the lowest since February 2026. Over the past 4 weeks, Dollar Index lost 2.22%, and in the last 12 months, it decreased 1.98%.

Dollar Index Hits 9-week Low

The South African rand strengthened to around 16.4 per USD, the highest in over two weeks, as renewed hopes of a US-Iran peace deal boosted risk appetite. Oil prices extended losses while precious metals climbed after US President Trump signaled progress toward a possible agreement with Iran and suggested tensions around the Strait of Hormuz may ease. This development eased inflation concerns and tempered expectations that major central banks may need to raise interest rates.

South African Rand at Over 2-Week High

The euro strengthened above $1.17, trading at its highest since April 21, as optimism over a potential US-Iran agreement grew. US President Donald Trump paused "Project Freedom," the operation guiding ships through the Strait of Hormuz, citing "great progress" in talks with Iran. Yet, he stressed that the US blockade of ships to and from Iranian ports would "remain in full force and effect," keeping uncertainty alive over the Strait’s future.

Euro Gains as US-Iran Deal Hopes Rise

The British pound climbed toward $1.36, approaching last week’s two-month peak of $1.366, as optimism grew over a potential US-Iran agreement. US President Donald Trump announced a pause in "Project Freedom," the operation guiding ships through the Strait of Hormuz, citing "great progress" in mediated talks with Iran. However, he emphasized that the US blockade of ships to and from Iranian ports would "remain in full force and effect," leaving uncertainty over the Strait’s future. Meanwhile, investors focused on Britain’s municipal elections on Thursday, with polls suggesting Prime Minister Keir Starmer’s Labour Party might face a significant setback.

Sterling Nears Two-Month High Amid US-Iran Deal Optimism

The rupiah lingered around IDR 17,400 per dollar on Wednesday, close to record lows as concerns over Indonesia’s external buffers deepened. Dwindling forex reserves and softer trade performance have amplified pressure, raising doubts over the country’s ability to stabilise the currency through intervention. Authorities moved to respond: the chief economic minister said the government is coordinating with Bank Indonesia to expand swap lines with China, Japan, and South Korea to bolster liquidity. The central bank also cut the limit for undocumented cash dollar purchases to USD 25,000 from USD 50,000 to curb speculative demand. Focus now turns to April reserves data due Thursday, after March figures fell to a near two-year low. On the trade front, March exports slipped for the first time since December, straining the external balance. April inflation at 2.42% remained within target, though rising global energy costs and supply disruptions from the Middle East conflict pose upside risks.

Rupiah Near Record Low as Reserves, Exports Weigh

The Japanese Yen touched 155.49 against the USD, the highest since February 2026. Over the past 4 weeks, US Dollar Japanese Yen lost 2.51%, and in the last 12 months, it increased 8.2%.

Japanese Yen Hits 10-week High

The South Korean Won touched 1454.00 against the USD, the highest since March 2026. Over the past 4 weeks, US Dollar South Korean Won lost 2.71%, and in the last 12 months, it increased 4.13%.

South Korean Won Hits 9-week High

The offshore yuan traded around 6.81 per dollar on Wednesday, approaching its strongest level since March 2023, as demand for safe-haven assets such as the greenback weakened amid diplomatic progress between the US and Iran. Market sentiment improved after President Donald Trump pointed to what he described as “great progress” toward a “complete and final agreement with representatives of Iran,” while stating that the US would temporarily pause efforts to assist stranded vessels leaving the Strait of Hormuz. In parallel, Trump indicated he would discuss the Iran conflict with Chinese President Xi Jinping during their upcoming summit on May 14–15, while seeking to temper tensions surrounding the issue. On the domestic front, a private survey showed that the composite PMI rose to 53.1 in April from 51.5 in March, as both manufacturing output (52.2 vs. 50.8) and services activity (52.6 vs. 52.1) expanded at a faster pace.

Offshore Yuan Approaches 3-Year High

The South Korean won rose toward 1,456 per dollar, rebounding to its strongest level in over two months, amid easing geopolitical risk and improved external conditions. US President Donald Trump signaled a pause in maritime operations in the Strait of Hormuz while negotiations with Iran continue, reducing fears of prolonged disruption in a key global oil shipping route and pushing crude prices lower. Lower oil prices improve import cost expectations and soften external balance pressures for South Korea, easing depreciation risks for the won. Domestic inflation rose to a 21-month high on fuel costs tied to earlier energy price spikes, but remains driven mainly by import pass-through rather than demand pressures, limiting overheating concerns while keeping monetary policy expectations broadly stable. The currency also benefited from stronger foreign inflows into Korean assets amid improved global risk appetite, as investors added to local equities, reinforcing FX demand for the won.

South Korean Won Hits Over 2-Month High

The Japanese yen rose toward 157.5 per dollar on Wednesday, snapping a three-day losing streak as both the US dollar and oil prices declined on growing signs of de-escalation in the Middle East. Washington reaffirmed the ceasefire, confirmed that offensive operations against Iran have ended, and temporarily paused efforts to assist stranded vessels leaving the Strait of Hormuz to allow time for potential renewed talks with Tehran. The yen remains particularly sensitive to Middle East developments due to Japan’s heavy dependence on oil imports from the Gulf. At the same time, investors stayed alert to the possibility of official support for the currency following suspected intervention by Japanese authorities last week. Estimates suggest Tokyo may have deployed around $35 billion to stabilize the yen, although officials have not confirmed any intervention. Still, the yen’s recent pullback suggests a lack of further follow-through action from policymakers.

Yen Strengthens as Dollar and Oil Ease

The dollar index fell toward 98 on Wednesday, ending a three-day advance as growing optimism that Washington could reach a deal with Tehran reduced demand for the currency’s safe-haven appeal. Defense Secretary Hegseth said the ceasefire that began nearly a month ago remains intact, while Secretary of State Rubio confirmed that offensive operations have concluded as Washington shifts its focus to protecting shipping routes in the strait. President Trump also announced a temporary pause in a US-led effort to assist stranded vessels in exiting the Strait of Hormuz to allow time for renewed talks with Tehran. Oil prices retreated, easing inflation concerns and tempering expectations that the Federal Reserve may need to raise interest rates to arrest price pressures. Market participants now turn to ADP’s private payrolls report for April to assess labor market strength, ahead of the more closely watched monthly jobs report due Friday.

Dollar Slides on Iran Deal Optimism

The Australian dollar climbed to above $0.72, hitting a fresh four-year high after the Reserve Bank delivered a widely expected 25bp hike to 4.35%, while risk sentiment improved amid signs of de-escalation in the Middle East conflict. In an eight to one vote, the RBA raised the cash rate for a third straight meeting, underscoring its focus on bringing inflation back to the 2–3% target. The decision marked a more hawkish stance than the split seen in March, though policymakers signaled that monetary policy is now “well placed to respond to developments,” hinting at a possible pause ahead. Markets see only a 20% chance of another move in June, while a further increase toward 4.60% by September remains fully priced. On the geopolitical front, optimism grew that a deal with Tehran could be within reach, after the US declared an end to offensive operations against Iran, reaffirmed the ceasefire, and temporarily paused efforts to help stranded vessels exit the Strait of Hormuz.

Aussie Dollar Hits Fresh 4-Year Top

The New Zealand dollar rose to $0.591, marking a second consecutive session of gains, as investors digested the labor market report. The unemployment rate ticked down to 5.3% in the first quarter from 5.4% in the previous quarter, slightly below market expectations of 5.4%. Meanwhile, employment increased by just 0.2% over the quarter, missing the 0.3% forecast. The war in the Middle East has weighed heavily on business confidence, leading firms to scale back investment and hiring. Other details in the report also point to ample spare capacity in the market and subdued wage growth. Markets are pricing in only a 35% chance of a rate hike later this month, but an increase in July is still fully priced in. The Reserve Bank of New Zealand held its cash rate steady in April but signaled that any signs of significant second-round inflationary effects or a rise in medium-term inflation expectations would warrant decisive and timely rate hikes.

New Zealand Dollar Rises After Jobs Report

The Israeli New Sheqel touched 2.91 against the USD, the highest since November 1993. Over the past 4 weeks, US Dollar Israeli New Sheqel lost 6.95%, and in the last 12 months, it decreased 18.73%.

Israeli New Sheqel Hits 32-1/2-year High

The dollar index traded little changed at 98.4 on Tuesday, pausing the gains recorded over the previous two sessions as tensions between the US and Iran showed signs of easing. This follows an intense day on Monday, when both countries exchanged fire and the UAE became involved. A ceasefire now appears to be holding, and US Defense Secretary Pete Hegseth said two US commercial vessels transited safely through the Strait of Hormuz with military support, offering some reassurance. Still, the situation remains fragile. On the policy front, the Fed is widely expected to keep the federal funds rate unchanged through the rest of the year, with markets pricing in roughly a 50% chance of a quarter-point hike in early 2027. The dollar weakened against the euro, the pound, and the Australian dollar after the Reserve Bank of Australia raised borrowing costs for a third consecutive meeting. In contrast, the greenback gained against the yen amid suspected intervention by Japanese authorities.

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