Dollar drops as euro hits record highs after Israel-Iran ceasefire
Photo: Dollar rate is falling (Getty Images)
The fragile ceasefire between Israel and Iran has sparked investor optimism and triggered a decline in the US dollar. News of a truce has fueled demand for riskier assets and strengthened risk-sensitive currencies, according to Reuters.
Markets rallied, and the global stock index hit a record high overnight after a tenuous ceasefire agreement between Iran and Israel came into effect.
The two countries signaled that their aerial conflict had come to an end, at least for now, following public criticism from US President Donald Trump, who chastised both sides for violating the ceasefire he had declared.
Investors began actively selling the dollar following the news, after pouring money into the safe-haven currency during the 12 days of warfare between Israel and Iran. During the conflict, the US also launched strikes on Iranian uranium enrichment facilities.
Major currencies movement
The euro remained near its highest level since October 2021, trading around $1.1621. The Swiss franc hit a 10.5-year high the day before and stabilized at $1.2430. The British pound edged slightly lower to $1.3615, though it stayed near its recent session peak.
The Australian dollar rose to about $0.6492, reflecting a growing risk appetite. The New Zealand dollar also gained, reaching around $0.6015. The Japanese yen stabilized at about 144.96 per dollar after earlier demand for safe-haven assets during the escalation.
Investor caution remains
Despite the announced ceasefire, markets remain cautious. Joseph Capurso, head of international and sustainable economics at the Commonwealth Bank of Australia, noted that risks persist and the conflict could again impact commodity prices and currency markets.
Investors are welcoming the temporary lull but are prepared for a possible resurgence of tensions.
The dollar's exchange rate dynamics reflect a mix of geopolitical and monetary factors. The ceasefire news offers a temporary distraction from broader risks, but upcoming economic data or renewed escalation could quickly shift the balance of currency demand.
Oil prices inched up following a steep drop on June 24 after the ceasefire. Brent crude futures are trading around $68 per barrel, close to pre-war levels.
The euro’s surge against the dollar prompted the National Bank of Ukraine (NBU) to raise the official rate to a new historic high of 48.50 UAH/EUR.
In a comment to RBC-Ukraine, Oleksandr Martynenko, Head of the Corporate Analysis Department at ICU Group, noted that uncertainty on global markets remains. Despite the recent dip in oil prices, a renewed rally could still be on the horizon.
