The U.S. dollar pulled back on Monday after reaching a three-month high, following remarks from Donald Trump suggesting that the conflict with Iran could soon come to an end.
The greenback had earlier strengthened on safe-haven demand as tensions escalated in the U.S.–Israel conflict with Iran, which also drove a surge in oil prices. However, the currency reversed direction and moved sharply lower after Trump’s comments raised hopes of de-escalation.
As of 17:24 ET (21:24 GMT), the U.S. Dollar Index—which measures the dollar against a basket of six major currencies—was down 0.1% at 99.557. Earlier in the session, the index had risen as much as 0.6%, briefly reaching its highest level since late November 2025 before surrendering those gains.
Dollar extends sharp gains in powerful run.
The U.S. dollar has surged in recent sessions, supported by safe-haven demand as a sharp rise in oil prices raised concerns about the outlook for global economic growth. The U.S. Dollar Index recorded its strongest weekly performance since early August 2025 on Friday.
“The Dollar Index has rallied significantly in a short period, so it may need to consolidate before attempting another move higher,” said David Morrison, senior market analyst at Trade Nation. “It tested the 100.00 level several times last year, particularly during November, but failed to break above it on each occasion.”
He added that the index would need to build substantial upward momentum to overcome that resistance. “While the U.S. dollar may have finally found a bottom, if the Dollar Index fails to break above 100.00, a retest of the January lows near 95.25 cannot be ruled out,” Morrison said.
Earlier in the day, crude prices surged to nearly $120 a barrel, approaching levels seen at the start of the Russian invasion of Ukraine. However, prices later trimmed gains and then fell sharply after Donald Trump told CBS that the war was “very complete, pretty much,” and that developments were progressing “very far” ahead of his administration’s initial four-to-five-week timeline.
Over the weekend, Israeli and U.S. airstrikes targeted Iranian oil facilities, while Tehran responded with missile strikes against several oil installations across the Middle East.
Iran also effectively shut down the Strait of Hormuz by attacking vessels passing through the shipping lane, a crucial route for oil supplies to much of Asia.
Even so, oil prices pared earlier gains on Monday after reports that the Group of Seven (G7) would discuss a potential coordinated release of emergency reserves to counter supply disruptions caused by the conflict.
Brent crude oil futures for May delivery initially surged more than 30% to a peak of $119.50 a barrel, while West Texas Intermediate crude futures jumped about 30% to an intraday high of $119.43. Both benchmarks later turned sharply lower following Trump’s comments to CBS.
Euro pressured by worries over economic growth.
In Europe, EUR/USD trimmed earlier losses to trade little changed at 1.1634. The single currency has come under pressure as rising oil prices highlight the eurozone’s reliance on imported energy, dampening expectations for economic growth in the region.
Analysts at ING Group noted that prolonged high energy prices could undermine the narrative of synchronized global growth in 2026 and weaken Europe’s efforts to catch up with the strong economic performance of the United States.
Economic data released earlier on Monday also pointed to weakness. Germany’s factory orders plunged 11.1% in January, far worse than the expected 4.2% decline and a sharp reversal from the 6.4% increase recorded in the previous month.
Meanwhile, German industrial production fell 0.5% in January after dropping 1.0% in the prior month, adding to concerns about the strength of the region’s largest economy.
Elsewhere, GBP/USD recovered slightly, edging up 0.1% to 1.3432. The British pound sterling had also been pressured earlier as surging energy costs prompted traders to shift toward the stronger U.S. dollar.
Yen stabilizes after recent volatility.
In Asia, USD/JPY fell 0.1% to 157.66, although the Japanese yen remained under pressure after heavy losses in the Nikkei 225 as surging oil prices weighed on investor sentiment.
The yen drew limited support from stronger-than-expected wage income data for January, which showed a notable increase in pay levels—a trend that could reinforce medium-term inflation expectations in Japan.
Meanwhile, USD/CNY rose 0.2% to 6.9066, moving above the 6.9 yuan level after a weaker daily midpoint fixing from the People’s Bank of China.
Government data also showed that China’s consumer price index increased 1.3% year-on-year in February, exceeding expectations of 0.9% and marking the fastest pace of inflation in three years.
The stronger reading was largely driven by higher spending during the extended Lunar New Year holiday period, when demand for travel, services, and discretionary goods rose sharply.
However, producer price index inflation remained in contraction, leaving markets looking for further evidence on whether China’s inflation trend can continue beyond the holiday-driven boost. Elsewhere, AUD/USD edged up slightly to 0.7071, while NZD/USD gained 0.6% to 0.5932.
Sources: Anuron Mitra
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