The dollar softened on Monday, while Asian currencies strengthened as encouraging comments on a potential U.S.-Iran peace deal helped spruce up risk appetite.
Trading volumes were muted on account of holidays in the U.S., Hong Kong, and South Korea.
But market sentiment improved after reports over the weekend flagged some progress towards a U.S.-Iran peace deal, with oil prices falling sharply on Monday.
The dollar index and dollar index futures fell 0.2% apiece on Monday, retreating after logging some gains last week.
U.S. President Donald Trump said over the weekend that the U.S. and Iran had "largely negotiated" a framework agreement to end their conflict and reopen the Strait of Hormuz.
Separate reports showed Iran and Pakistani mediators also flagging progress in talks.
But Trump later said he was in no rush to finalize a deal. Iran also largely rejected U.S. demands to hand over its enriched uranium holdings.
Despite the mixed signals, markets still cheered a potential end to the Iran war, sending oil prices sharply lower. This weighed on the dollar.
Asian currencies broadly firmed on Monday. The Indian rupee’s USD/INR pair was among the best performers, falling 0.5% and pulling back sharply from record highs.
Reserve Bank of India Governor Sanjay Malhotra said the rupee appeared undervalued and that the central bank will do "whatever is required" to stabilize local currency markets.
Other Asian currencies also firmed. The Japanese yen’s USD/JPY pair fell 0.2%, while the Chinese yuan’s USD/CNY fell 0.2%.
The Australian dollar’s AUD/USD pair surged 0.5%, recouping some losses from last week following a weak job print for April.
The Singapore dollar’s USD/SGD pair fell 0.2% after first-quarter gross domestic product data read much stronger than expected.
