U.S. Dollar Weakens After Israel-Iran Ceasefire Declaration

The U.S. dollar weakened notably on Tuesday as geopolitical tensions eased following the announcement of a ceasefire agreement between Israel and Iran. The shift in market sentiment triggered a move away from safe-haven assets, with investors seeking higher-risk, higher-return opportunities.

Former U.S. President Donald Trump confirmed that a “comprehensive and complete” ceasefire had been agreed upon between the two sides, ending 12 days of escalating conflict. Iranian and Qatari officials confirmed Tehran’s approval of the truce, while Israeli media reported that Prime Minister Benjamin Netanyahu agreed to the ceasefire, conditional on Iran halting its attacks.

Broad-Based Decline in the Dollar:

The dollar fell 0.21% against the Japanese yen, trading at 145.79 yen, reversing gains made during recent geopolitical unrest.

It also slipped 0.21% against the euro, reaching $1.1602.

Against the British pound, the dollar declined 0.18% to $1.3551.

This broad decline reflects a shift in investor sentiment as the immediate geopolitical threat recedes. As a result, traders rotated away from the U.S. dollar in favor of risk-sensitive currencies like the Australian and New Zealand dollars, which rose 0.35% and 0.37% respectively.

The U.S. dollar had previously benefited from heightened demand for safe-haven assets amid the Middle East conflict. However, the announcement of a ceasefire significantly reduced perceived risk, triggering profit-taking and a reversal in dollar strength.

The dollar’s pullback highlights its sensitivity to global political developments. With geopolitical tensions easing, the currency has lost some of the support it had recently gained. Unless new sources of risk emerge, investor appetite may continue to favor riskier assets, keeping the dollar under pressure in the near term.