Dollar Holds Decline on Diplomatic Push

The dollar index hovered around 98.5 on Tuesday after a sharp intraday drop in the prior session, as renewed diplomatic efforts to resolve the US–Iran conflict reduced demand for the safe-haven currency. Iran reportedly delivered a new proposal to the US through Pakistani mediators, offering to reopen the Strait of Hormuz if Washington lifts its blockade, though Tehran’s nuclear program remains a key sticking point in negotiations. Attention is also turning to the upcoming Federal Reserve policy meeting, where rates are widely expected to remain unchanged in what could be Jerome Powell’s final session as Fed chair. Fed nominee Kevin Warsh has emphasized policy independence, even as markets continue to price in a more aggressive easing cycle ahead. Investors are also awaiting policy decisions from other major central banks this week, including the ECB, BOE, and BOJ.

The dollar index slipped to around 98.5 on Monday after briefly climbing as high as 99.3 earlier in the session, as markets reacted to reports that Iran had submitted a new proposal to the US aimed at reopening the Strait of Hormuz and easing tensions. The proposal, reportedly delivered via Pakistani mediators, called for an extension of the ceasefire to enable progress toward a lasting settlement, while postponing nuclear negotiations until the US blockade of the strait is lifted. Earlier in the session, the dollar jumped after President Donald Trump cancelled plans to send senior envoys for a second round of talks with Iran, while Tehran reiterated it would not engage in negotiations under threats or blockade conditions. Meanwhile, the Federal Reserve is widely expected to keep its policy rate unchanged on Wednesday, a meeting that could mark Jerome Powell’s final session as chair before Kevin Warsh is expected to assume the role in May.

The dollar index climbed as high as 99.3 on Monday before easing to around 98.5, as efforts to resume peace negotiations between the US and Iran failed to push through, keeping markets cautious about geopolitical tensions. President Trump cancelled plans to send senior envoys for a second round of talks with Iran, while Tehran reiterated it would not negotiate under threats or blockade conditions. Oil prices rallied again as the Middle East conflict entered its ninth week and the Strait of Hormuz remained effectively shut, fueling inflation concerns and increasing expectations that central banks may keep interest rates higher for longer or even tighten further. The Federal Reserve is widely expected to hold its policy rate steady on Wednesday, a meeting that could mark Jerome Powell’s final session as chair before Kevin Warsh is anticipated to take over in May. Investors are also positioning ahead of key policy decisions from the ECB, Bank of England, and Bank of Japan later this week.