USD Weakens as Middle East De-Escalation Hopes Lift Risk Sentiment

Risk-sensitive currencies are gaining ground against the US dollar in early Tuesday trading as reports from the Wall Street Journal suggest the US may be open to winding down military operations in the Middle East without requiring Iran to reopen the Strait of Hormuz. The development, if confirmed, could reduce geopolitical risk premiums that have supported safe-haven flows into the dollar, Swiss franc, and Japanese yen in recent sessions. However, market participants remain cautious, questioning whether this represents a genuine shift in US foreign policy or another false dawn, given that the arrangement would not fully satisfy President Trump's stated objectives regarding Iran. AUD/USD and NZD/USD are among the early beneficiaries of improved risk appetite, while USD/JPY faces downward pressure as haven demand softens. Oil prices have also eased on the news, potentially benefiting oil-importing nations' currencies. Traders should monitor follow-up statements from the White House for confirmation, as any walkback could quickly reverse these moves. Key support for the US Dollar Index sits near recent lows, with resistance at prior session highs.