The U.S. dollar slipped on Tuesday as investors bet the Iran conflict may end sooner than feared. Despite weakness, the currency is on track for its strongest quarter since late 2024.
The dollar index fell 0.59% to 99.96, cutting gains but still heading for a 2.35% monthly and 1.7% quarterly rise. Safe-haven demand has bolstered the greenback since fighting began in late February, with the U.S. seen as better equipped than others to weather oil supply shocks.
President Donald Trump has signalled a willingness to wind down military operations against Iran even if the Strait of Hormuz remains closed, according to reports. Yet Defence Secretary Pete Hegseth warned the coming days would be decisive, cautioning Tehran that the conflict could intensify without a deal.
Markets remain volatile. Iran’s Revolutionary Guards threatened U.S. companies in the region. Analysts say the dollar is “overvalued,” but expect it to remain supported as long as war concerns persist and risk appetite remains low.
Meanwhile, traders are also bracing for Friday’s U.S. jobs report after February’s surprise loss of 92,000 positions. A weak labour market could revive expectations of Federal Reserve rate cuts later this year.
The euro rose 0.68% to $1.1543, while the pound gained 0.33% to $1.3228. The yen strengthened 0.55% to 158.84 per dollar, rebounding after Japanese officials threatened to intervene against speculative currency moves.
