Dollar Extends Fall on Dovish Powell Remarks

The dollar index hovered around 98 on Thursday, lingering near six-week lows as rising expectations of a diplomatic breakthrough between the US and Iran reduced demand for the safe-haven currency. President Donald Trump said the seven-week conflict was “close to over,” while the White House expressed confidence in a potential agreement, noting that additional in-person talks were likely to take place again in Pakistan. Reports also indicated that Tehran may consider allowing vessels to transit freely via the Omani side of the Strait of Hormuz if a deal is reached to prevent renewed hostilities. The dollar was further pressured by easing energy prices, which helped calm inflation concerns and reduced expectations of further central bank tightening. The Federal Reserve is broadly expected to keep interest rates unchanged this month and potentially through the remainder of the year.

The dollar index hovered near 98 on Wednesday, lingering around six-week lows as investors grew more optimistic about diplomatic progress between the US and Iran, while oil prices remained below recent peaks. Financial markets have largely unwound the risk premium that built up after the conflict began in late February, as both sides move toward a second round of negotiations. President Donald Trump said the war is “very close to over,” adding that Iran appears open to a peace deal, with talks expected to resume shortly. On the monetary policy front, the Federal Reserve is widely anticipated to keep interest rates unchanged this month and likely through the year, while Chicago Fed President Austan Goolsbee warned that any rate cuts could be pushed back as far as 2027 if elevated energy prices persist.

The dollar index traded near 98 on Wednesday, hovering at six-week lows as hopes for a diplomatic solution to the Middle East conflict dampened safe-haven demand for the currency. The move has nearly wiped out all the gains made since the Iran war began. The US and Iran are reportedly preparing for a second round of peace talks before the current two-week ceasefire expires, even as rising tensions in the Strait of Hormuz continue to exacerbate global energy risks. Oil prices pulled back sharply, easing concerns over inflation and potential central bank rate hikes. The Federal Reserve is now widely expected to keep rates unchanged for the remainder of the year, with Chicago Fed President Austan Goolsbee suggesting that rate cuts could be delayed until 2027 depending on how persistently high oil prices remain. Meanwhile, markets will focus on upcoming data including import and export price indexes, alongside the NY Empire State Manufacturing Index and the NAHB Housing Market Index.