SINGAPORE, April 8 - The U.S. dollar slipped to its softest level in two weeks at the start of Asian trading on Wednesday, as a number of major currencies rallied following a short-term de-escalation between the United States and Iran.
President Donald Trump said he had agreed to a two-week ceasefire with Iran. The comment came less than two hours before his deadline for Tehran to reopen the Strait of Hormuz. Markets reacted quickly, rotating into risk assets and pushing the greenback lower against several peers.
In currency moves, the yen strengthened by 0.6% against the dollar, trading at 158.68 yen per dollar. The euro rose 0.7% to $1.167, while the British pound gained 0.7% to $1.3385. The Australian dollar climbed 1.3% to $0.7068 and the New Zealand dollar jumped 1.4% to $0.5810.
The U.S. dollar index, which tracks the greenback against a basket of six currencies, was down 1.0% at 98.97, marking a two-week low for the measure. The market reaction was not limited to traditional currency markets: cryptocurrencies also advanced, with bitcoin up 3.4% at $71,664.41 and ether rising 5.7% to $2,234.78.
Trump had earlier issued threats of widespread attacks on Iran's civilian infrastructure. After the announcement of a two-week ceasefire, market sentiment shifted in favor of higher-risk assets. The move occurred shortly before the expiration of the U.S. deadline tied to operations in the Strait of Hormuz, a key shipping lane referenced in the announcement.
Market participants saw an immediate reallocation toward assets perceived as more sensitive to risk appetite, reflected in the simultaneous strengthening of several currencies and the uptick in major cryptocurrencies.
Market context and immediate effects
- Currency pairs and the dollar index moved decisively following the ceasefire announcement.
- Cryptocurrencies recorded notable gains alongside the currency moves.
- The shift toward risk assets took place within a narrow window before a stated deadline related to the Strait of Hormuz.