By Satoshi Sugiyama and Samuel Indyk
LONDON, April 1 (Reuters) – The dollar fell for a second day on Wednesday as expectations of a ceasefire in the Middle East conflict grew after the U.S. signalled that an end to the war could be near, even though markets remained on edge on fears of escalation.
The White House said U.S. President Donald Trump would address the nation “to provide an important update on Iran” at 9 p.m. EDT on Wednesday (0100 GMT on Thursday).
Trump said on Tuesday the U.S. could end its military campaign against Iran within two to three weeks, while Secretary of State Marco Rubio told Fox News Washington could see the “finish line” in the Iran war.
Expectations that a ceasefire could be near have reversed some of the most popular trades since the war began in late February.
The yen recovered from this year’s low of 160.46 per dollar, moving back through the psychologically important 160 level that had fanned concerns about intervention by Japanese authorities. The euro hit its highest level in a week.
The dollar index, which measures the currency against a basket of currencies including the yen and the euro, was last down 0.1% at 99.60, slipping to a one-week low after a 0.65% fall on Tuesday.
“Markets are increasingly buying into the notion of de-escalation in the Middle East overall,” said Kirstine Kundby-Nielsen, FX analyst at Danske Bank.
“Markets are optimistic. We’re seeing some relief with rates going lower, equities going higher and the price action in euro-dollar reflects that quite well.”
The euro edged up 0.3% versus the dollar to $1.1583, after rising 0.8% on Tuesday..
The Japanese yen was up 0.1% at 158.65 per dollar. Sterling strengthened 0.3% to $1.3265.
At the same time, there were still signs of escalation in the conflict. U.S. Defense Secretary Pete Hegseth said the next few days in the war against Iran would be decisive and warned Tehran that the conflict would intensify if it did not make a deal.
Meanwhile, attacks took place on multiple fronts on Wednesday, with drones hitting fuel tanks at Kuwait’s international airport and a tanker was struck by an unknown projectile off the Qatari capital Doha.
The U.S. dollar has benefited from a safe-haven bid since the conflict began in late February, and the U.S., a net energy exporter, is also relatively better positioned to handle oil disruptions than other nations.
Brent crude futures fell below $100 per barrel on Wednesday, although they were last trading at about $100.40.
EYES ON JOBS
This week’s main U.S. economic focus will be Friday’s jobs report for March. It is expected to show that employers added 60,000 jobs during the month, according to the median estimate of economists polled by Reuters, following an unexpected loss of 92,000 jobs in February.
A sharp deterioration in the labour market would likely revive expectations for rate cuts from the Federal Reserve this year, which have been largely priced out as rising oil prices from the Iran war stoked inflation concerns.
Markets were pricing in about 13 basis points of easing from the Fed this year, implying about a 50% chance of a quarter-point rate cut in 2026.
For the yen, the Japanese currency was little changed after the Bank of Japan’s quarterly Tankan survey showed business sentiment among large Japanese manufacturers improved in the three months to March, though firms expect conditions to worsen in the next three months.
The dollar should remain supported by the Fed’s cautious stance on rate cuts, while the yen is being underpinned by rising expectations of a Bank of Japan hike in April, said Sho Suzuki, market analyst at Matsui Securities.
“We may see a tug-of-war between dollar strength and yen strength, with USD/JPY trading sideways in the upper 150s,” he said.
The Australian dollar strengthened 0.4% to $0.6930. New Zealand’s kiwi strengthened 0.2% to $0.5756.
(Reporting by Samuel Indyk and Satoshi Sugiyama; Editing by Lincoln Feast and Arun Koyyur)
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