By Gregor Stuart Hunter and Lucy Raitano
SINGAPORE/LONDON, May 25 (Reuters) – The dollar fell against major currencies on Monday as hopes of a deal to reopen the Strait of Hormuz pushed oil prices below $100 a barrel, even as the United States and Iran played down chances of reaching a deal soon.
Many markets – including those in the United States, Hong Kong, Britain and “much of the rest of Europe” – were closed for holidays, reducing liquidity.
Against the yen, the dollar fell 0.2% to 158.91 yen.
Japan will build up an additional $19 billion in reserves to subsidize fuel costs and help address cost-of-living pressures, Prime Minister Sanae Takaichi said on Monday, as he seeks to calm bond market concerns by pledging no additional borrowing overall. The supplemental budget was first reported earlier this month.
The euro rose 0.33% to $1.1641 and the pound gained 0.55% to $1.3499. The Australian dollar rose 0.58% to $0.717, while its Kiwi counterpart rose 0.5% to $0.5874.
The US dollar index fell about 0.3% to 98.969.
IS THE US DEAL WITH IRAN CLOSER?
As diplomatic efforts continue to find a solution to the Iran war, US Secretary of State Marco Rubio said there would either be a good deal or Washington would deal with the country “differently.”
Iran’s Foreign Ministry spokesman said conclusions had been reached on many issues discussed in a possible memorandum of understanding with the United States, but this did not mean Tehran was close to signing an agreement.
“When a peace deal is reached, the dollar will weaken for a period. However, once that momentum is transmitted, the dollar will strengthen again due to its better fundamentals against major currencies,” wrote Samara Hammoud, international economist and currency strategist at CBA.
Oil markets plunged on hopes of a peace deal, with Brent crude prices falling 5% to $98.43 a barrel, while US West Texas Intermediate was at $88.83 a barrel, down 4.8%.
Over the weekend, there were mixed signals about the likelihood of a deal. US President Donald Trump said on social media on Saturday that a memorandum of understanding on a peace deal with Iran had been “largely negotiated”, with both countries and mediators in Pakistan reporting progress.
However, on Sunday Trump said on Truth Social that the US blockade of Iranian ships in the Strait of Hormuz “will remain in full force and effect until an agreement is reached, certified and signed.”
“Markets have been conditioned to be incredibly patient for tangible progress, but the base case for a deal remains firm, and the weekend’s news provides further conviction, even if the timing remains unclear,” said Chris Weston, head of research at Pepperstone Group Ltd in Melbourne.