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07/05/26
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Dollar Holds Near 98 as Iran Deal Hopes Weigh on Safe-Haven Demand
The US Dollar Index held near 98 on Thursday after falling almost 0.5% in the previous session, as traders weighed a softer safe-haven bid and easing pressure from energy markets. The index, which tracks the dollar against six major currencies, remained under modest pressure during Asian trading.
The main drag on the Greenback has been growing optimism that the United States and Iran could reach some form of agreement. That prospect helped push oil prices lower, reducing immediate concerns about inflation and tempering expectations that the Federal Reserve will need to keep policy restrictive for longer. A decline in crude often eases broader price pressures, which can weaken support for the dollar when rate-cut expectations begin to rise.
At the same time, Fed officials remain cautious about the inflation outlook. Chicago Fed President Austan Goolsbee said price growth has not continued moving toward the central bank’s 2% target and has, in his assessment, accelerated since the conflict began. His comments underscore the tension facing policymakers: while lower oil prices may help restrain inflation in the near term, renewed geopolitical uncertainty still threatens to complicate the Fed’s task.
Reports from the BBC said Iran is still reviewing a US proposal aimed at ending the conflict, even as both sides appear closer to an understanding. The proposal reportedly includes a phased reopening of the Strait of Hormuz and an easing of the US blockade on Iranian ports, with nuclear discussions to follow later. No final accord has been reached.
Separately, CNBC reported that President Donald Trump warned Iran would face a much stronger bombing campaign if it rejects a peace deal. He also said the US military operation would end if Iran accepts terms that have already been agreed in principle. The shifting tone around negotiations has kept markets alert, with the dollar reacting to both the possibility of de-escalation and the risk that talks could still break down.
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