FOREX: Dollar hangs near six-week lows as investors bet on Iran peace deal

The U.S. dollar held near its lowest level since early March against major currencies on Thursday, as the White House's optimism over a peace deal with Iran buoyed sentiment and encouraged traders to shed safe-haven positions.

President Donald Trump said the U.S.-Israeli war on Iran was "close to over," while the White House expressed optimism about a deal, saying more in-person talks would likely take place in Pakistan again.

A source briefed by Tehran told Reuters Iran could consider allowing ships to sail freely through the Omani side of the Strait of Hormuz if a deal was reached to prevent renewed conflict.

The euro stood at $1.1808 EUR= and the sterling traded at $1.3569 GBP=D3, both up about 0.1% for the day to hover near their highest level since February.

The dollar index =USD, which measures the currency's strength against six major peers, was steady at 98.027. It declined for eight straight sessions through Wednesday to give up most of the gains sparked by the Iran war, as a tentative ceasefire revived appetite for riskier currencies.

"Markets are now basically looking past the conflict and pricing that there's going to be some kind of settlement," said Khoon Goh, the head of Asia research at ANZ.

"As markets are pricing out the war premium, we could see the dollar coming under further pressure and resuming the downtrend that has been established since basically last year."

The dollar index is now just above the 98 level, a key near-term support, and a break below that could open up potential for further downside, he said. The index is down 0.7% for the week, poised for its second straight week of declines.

The risk-sensitive Australian dollar AUD=D3 fetched $0.7173 and the New Zealand dollar traded at $0.59139 NZD=D3, both near one-month highs.

The Japanese yen JPY= was slightly firmer at 158.78 after the country's finance minister said Japan and the U.S. agreed to intensify communication on exchange rates after her meeting with U.S. Treasury Secretary Scott Bessent on Wednesday.

The offshore yuan traded at 6.8146 yuan per dollar CNH=, up about 0.04% in early Asian trade, ahead of the first-quarter GDP reading.

-Jiaxing Li/Reuters