Trump-Iran Ceasefire Sends Dollar Tumbling as Global Currencies Surge

The U.S. dollar dropped to its lowest point in a month on Wednesday during Asian trading sessions after President Donald Trump announced a two-week ceasefire agreement with Iran, triggering a broad rally across major global currencies and risk assets.

The greenback weakened significantly as investors rushed back into riskier positions following the surprise announcement, which came less than two hours before Trump's deadline for Tehran to reopen the Strait of Hormuz. The dollar index fell for a third straight day, hitting 98.838 — its weakest reading since March 11.

Among the biggest gainers, the New Zealand dollar led the charge with a 1.5% rise to $0.5819, boosted further after the Reserve Bank of New Zealand held its benchmark interest rate steady at 2.25% for a second consecutive meeting while signaling readiness to tighten policy if inflation pressures build. The Australian dollar climbed 1.1% to $0.7054, the euro gained 0.7% to $1.1674, the British pound rose 0.8% to $1.34, and the Japanese yen strengthened 0.8% to 158.36 per dollar. South Korea's won surged 1.6% to 1,477.10, brushing aside news that North Korea had launched multiple ballistic missiles into the sea off its eastern coast.

Oil markets reacted sharply, with Brent crude plunging 13.4% to $94.68 a barrel, though prices remained elevated compared to pre-conflict levels. Ray Attrill, head of FX strategy at National Australia Bank, noted that a durable risk-on rally would depend on whether the Strait of Hormuz is successfully reopened, cautioning that markets should maintain a degree of skepticism over the next 14 days.

Expectations around Federal Reserve policy also shifted, with futures markets now pricing near even odds of a 25-basis-point rate cut at the December 9 meeting. Cryptocurrencies joined the rally, with Bitcoin climbing 2.9% to $71,327 and Ether rising 5.6% to $2,233.