US dollar drops as traders remain optimistic on Iran peace breakthrough
FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 24, 2026. REUTERS/Dado Ruvic/Illustration/File Photo
NEW YORK, April 20 : The U.S. dollar fell against the euro on Monday on optimism that a ceasefire deal in the Iran war will be reached despite renewed tensions between Washington and Tehran over the weekend.
Iran is considering attending peace talks with the United States in Pakistan, a senior Iranian official told Reuters on Monday, following moves by Islamabad to end a U.S. blockade of Iran's ports, a major hurdle for Tehran to rejoin peace efforts.
The United States said on Sunday that it had seized an Iranian cargo ship that tried to run its blockade, while Iran said it would retaliate, stoking fears about a resumption of hostilities.
"The market seemed to have had a knee-jerk panic reaction to the weekend developments when it first opened last night. But the price action since then has leaned towards a bit of a relief and a renewed sense of hope for a resolution," said Eric Theoret, a foreign exchange analyst at Scotiabank.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,fell 0.39 per cent to 98.07, with the euro up 0.16 per cent at $1.1781.
The Japanese yen weakened 0.1 per cent against the greenback to 158.81 per dollar.
The dollar index is down 1.78 per cent in April. It had surged 2.27 per cent in March on safe-haven demand after the war broke out.
"We reached a peak of fear in late March and we've been slowly recovering," Theoret said.
MARKETS FOCUS ON STRAIT OF HORMUZ
Now in its eighth week, the war has created the most severe shock to energy supplies ever, sending oil prices surging because of the de facto closure of the Strait of Hormuz, which typically handles about a fifth of the world's oil shipments.
The U.S. has maintained a blockade of Iranian ports, while Iran has lifted and then reimposed its own blockade on marine traffic passing through the waterway.
Oil prices rose more than 5 per cent on Monday.
Sterling strengthened 0.16 per cent to $1.3535.
British Prime Minister Keir Starmer put the blame firmly on foreign ministry officials on Monday over the appointment of a U.S. ambassador as political opponents call for him to resign over the scandal. Starmer sacked Peter Mandelson in September due to revelations about the depth of his ties to the late U.S. sex offender Jeffrey Epstein.
In the U.S., traders will also watch the Senate confirmation hearing for Kevin Warsh on Tuesday, who is Trump's nominee to head the Federal Reserve.
Warsh will tell lawmakers that he is "committed to ensuring that the conduct of monetary policy remains strictly independent," according to prepared remarks released on Monday.
