Dollar softer as signs of deal to reopen Hormuz spur risk appetite

The dollar held around its lowest levels in a week in Asian trading on Monday as hopes of a deal to reopen the Strait of Hormuz pushed oil prices below $100 per barrel, even as the U.S. played down the chances of reaching an agreement with Iran soon.

Against the yen JPY=, the U.S. dollar was down 0.2% at 158.9 yen, while the euro EUR= rose 0.3% to $1.1636 and the British pound GBP= gained 0.3% to $1.3476.

Many global markets are closed for holidays on Monday, thinning liquidity across the region.

The Australian dollar AUD= advanced 0.5% at $0.7162, while its kiwi counterpart NZD= tacked on 0.4% to $0.5869.

"There are early signs that risk sentiment remains supported, early Sydney trade revealing a broad-based selloff in the USD, with 'riskier' currencies like the AUD benefitting as a result," analysts from Westpac wrote in a research note.

The U.S. dollar index =USD, which measures the greenback's strength against a basket of six currencies, slipped 0.1% to an intraday low of 98.95, its weakest level since May 18.

Oil markets tumbled on hopes of a peace deal, with Brent crude LCOc1 prices down 5.4% to $97.91 a barrel while U.S. West Texas Intermediate CLc1 was at $91.10 a barrel, off 5.7%.

Over the weekend, there were conflicting signs on a peace deal. U.S. President Donald Trump said on social media on Saturday that a memorandum of understanding on a peace deal with Iran had been "largely negotiated," with both countries and mediators in Pakistan reporting progress.

However, on Sunday Trump said on Truth Social the U.S. blockade on Iranian ships in the Strait of Hormuz would "remain in full force and effect until an agreement is reached, certified, and signed". There was no immediate response from Iran's government.

In the markets, there wascautious optimism that a deal would eventuallybe reached.

"Markets have become conditioned to be incredibly patient on a tangible breakthrough, but the base case of a deal remains firm, with the weekend news providing further conviction, even if the timing remains unclear," said Chris Weston, head of research at Pepperstone Group Ltd in Melbourne.

Bitcoin BTC= was up 0.5% at $76,961.76, while ether ETH= was flat at $2,091.65.

-Reporting by Gregor Stuart Hunter;Editing by Shri Navaratnam and John Mair/Reuters