The dollar index fell about 0.5% to below 98 on Friday, its lowest level since the onset of the conflict with Iran, after news of a temporary reopening of the Strait of Hormuz eased near-term inflation concerns. Iran’s foreign minister announced that the strait is now fully open to all commercial vessels for the duration of the 10-day ceasefire.
In turn, oil prices dropped more than 10%, leading traders to increase wagers on Federal Reserve rate cuts this year. Futures markets are now assigning roughly even odds to a 25-basis-point cut by year-end, up from around a 30% probability on Thursday. That still falls short of earlier expectations for two cuts before the conflict escalated.
The greenback weakened across the board, with the steepest losses against the Swiss franc, Australian dollar, Japanese yen, and the euro. For the week, the dollar index is down about 0.5%, putting it on track for a third straight weekly decline.
