The dollar fell on Tuesday while the Australian and New Zealand dollars rose after U.S. President Donald Trump announced a ceasefire between Israel and Iran, in news that sent investors cheering and sparked a risk rally across markets.
Trump said that a “complete and total” ceasefire between Israel and Iran will go into force with a view to ending the 12-day conflict between the two nations, moments after both sides threatened new attacks.
An Iranian and Qatari official confirmed that Tehran had agreed to a ceasefire, while Israel’s Channel 12 reported that Prime Minister Benjamin Netanyahu had agreed in a conversation with Trump to a ceasefire as long as Iran stopped its attacks.
The risk-sensitive Aussie got a lift from the news and last traded 0.35% higher at $0.6483 as did the kiwi, which rose 0.37% to $0.5998.
“It’s obviously positive news for risk sentiment,” said Rodrigo Catril, senior currency strategist at National Australia Bank.
“We need to obviously have a bit more details in terms of exactly what all this means… I suppose it will be the conditions of the ceasefire, and what are the conditions for a more longer-lasting peace deal.”
The dollar, which last week drew support from safe-haven demand, fell broadly in the wake of the news.
Against the yen, the greenback was down 0.21% at 145.79.
The euro rose 0.21% to $1.1602 and sterling advanced 0.18% to $1.3551.
Trump’s comments on his Truth Social site came after Iran launched a missile attack on an American air base in Qatar on Monday that caused no injuries, in a move which he dismissed as a “weak response” to U.S. attacks.
Adding to headwinds for the dollar were dovish comments from Federal Reserve policymaker Michelle Bowman, who said the U.S. central bank should consider interest rate cuts soon.
Bowman’s openness to cutting rates soon is supported by Fed Governor Christopher Waller, who said in a television interview last week he’d also consider a rate cut at next month’s meeting.
“There appears to be increasing division among the ranks of the Fed board ahead of Fed Chair Powell’s testimony,” said Tony Sycamore, a market analyst at IG.
“The chance of a July rate cut… is still underpriced. I think it should be higher than that.”
Markets are now pricing in about a 20% chance the Fed could ease rates in July, up from 14.5% a day ago, according to the CME FedWatch tool.
Fed Chair Jerome Powell is due to testify before the U.S. Congress on Tuesday and Wednesday, where focus will be on the outlook for U.S. rates.
(Reporting by Rae Wee)
