The dollar climbed on Tuesday, recovering from the previous session’s decline as uncertainty surrounding U.S.–Iran peace negotiations dampened sentiment and boosted demand for safe-haven assets.
The greenback showed little response to an unverified media report released after the Wall Street close, which suggested a potential ceasefire between the two countries.
As of 17:49 ET (21:49 GMT), the U.S. Dollar Index—measuring the currency against a basket of six major peers—rose 0.3% to 99.23.
Dollar rebounds amid persistent uncertainty
The dollar regained ground as uncertainty continued to dominate market sentiment. On Monday, Donald Trump stated that he would postpone potential strikes on Iran’s energy facilities for five days following what he described as “very positive and productive” discussions aimed at ending the nearly month-long conflict. His remarks initially pressured the dollar, pushing it to its lowest level in almost two weeks.
However, sentiment shifted on Tuesday as conflicting media reports emerged regarding developments in the Middle East. Iran’s parliamentary speaker dismissed Trump’s claims, accusing him of fabricating the talks to calm volatile financial markets.
Later, Trump told reporters that negotiations were still underway and asserted that Iran had agreed to forgo developing nuclear weapons. He also noted that U.S. Secretary of State Marco Rubio and Vice President JD Vance were involved in the discussions.
Following the close of Wall Street, Israel’s Channel 12 reported that U.S. Middle East envoy Steve Witkoff and businessman Jared Kushner were working on a framework to establish a ceasefire and initiate negotiations based on a 15-point plan. Meanwhile, The New York Times reported that the U.S. had already delivered a proposal to Iran aimed at ending the conflict.
Despite these developments, hostilities in the Middle East continue, with the Strait of Hormuz—a crucial passage south of Iran through which roughly 20% of global oil supply flows—effectively closed. The strait remains a major flashpoint, as the risk of Iranian attacks on vessels threatens to disrupt vital energy shipments, particularly to key Asian importers.
Analysts at ING noted that the dollar remains highly sensitive to evolving headlines surrounding the conflict. They added that markets are closely watching for signals—especially from Iran—on whether meaningful ceasefire negotiations could begin. Until clearer progress emerges, any sustained rally in risk assets or significant decline in the dollar is likely to remain limited.
Euro and sterling steady; yen in spotlight after Japan inflation data
The euro and British pound remained largely stable on Tuesday, with EUR/USD edging slightly higher to 1.1607 and GBP/USD ticking up to 1.3409.
Meanwhile, the dollar posted modest gains against the Japanese yen after fresh data showed Japan’s inflation slowed more than expected in February. Core inflation dropped below the central bank’s target for the first time in four years, reinforcing expectations that the Bank of Japan may adopt a more cautious approach toward further monetary tightening.
Analysts at ING noted that the central bank is likely to look past the recent slowdown in inflation and instead focus on potential upside risks to prices.
They added that strong wage negotiation outcomes and firmer-than-expected PMI readings could still support the case for an interest rate hike as early as April. However, the exact timing remains uncertain and may depend on evolving geopolitical developments, particularly in the Middle East.
Sources: Anuron Mitra
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