Dollar Falls as U.S.-Iran Agreement Eases Safe-Haven Demand Ahead of Fed Meeting

The U.S. dollar weakened on Monday after the United States and Iran reached an agreement aimed at restoring access through the Strait of Hormuz, reducing demand for traditional safe-haven assets and boosting risk sentiment across global markets.

The U.S. Dollar Index fell to around 99.5, its lowest level in more than a week, as investors reacted to signs of easing geopolitical tensions in the Middle East.

The agreement, expected to be signed in Switzerland on June 19, includes provisions to reopen the Strait of Hormuz, lift blockades affecting regional trade, ease sanctions on Iran, and dismantle Tehran’s nuclear program, according to reports.

The announcement also weighed on energy markets, with crude oil prices falling to their lowest levels in nearly two months as concerns over supply disruptions eased. Lower energy prices helped reduce fears of renewed inflationary pressures, supporting expectations that major central banks may maintain current policy settings in the near term.

Investor attention is now shifting to the Federal Reserve’s upcoming policy meeting, the first under Chair Kevin Warsh. Markets broadly expect policymakers to leave interest rates unchanged while assessing the outlook for inflation, economic growth, and labor market conditions.

Elsewhere, the Reserve Bank of Australia and the Bank of England are also expected to keep rates steady this week. In contrast, the Bank of Japan is widely anticipated to raise interest rates as policymakers seek to support the yen and address persistent currency weakness.

The combination of easing geopolitical risks, lower oil prices, and a busy week for central bank decisions is expected to remain a key focus for global financial markets in the days ahead.