Easing safe-haven demand weighs on the USD as Washington and Tehran agree to pause attacks before Tuesday’s peace negotiations.
The US Dollar Index (DXY) extended losses for a third straight session, trading near 101.20 in European hours Monday. The decline follows reports that the US and Iran have agreed to halt reciprocal attacks, reducing demand for the greenback as a safe haven.
The diplomatic pause comes after days of escalating strikes, including an Iranian projectile hitting a cargo vessel last Thursday. Both sides accused each other of violating a June 17 ceasefire, but officials will resume talks in Qatar on Tuesday. Despite the truce, traders remain cautious amid fluid Middle East developments.
Hawkish Federal Reserve expectations may limit further downside for the USD. The CME FedWatch Tool shows a 79.5% probability of a December rate hike. Key US labor data, including Thursday’s Nonfarm Payrolls report, will offer clues on the Fed’s trajectory, with forecasters expecting 114,000 new jobs in June.