The US Dollar (USD) has weakened against major currencies, particularly the New Zealand Dollar (NZD) and Australian Dollar (AUD), as markets react to reports of a peace proposal from Iran aimed at ending the conflict with the United States and reopening the Strait of Hormuz. According to Axios, Tehran sent a proposal to the US, including the reopening of the Strait and postponing nuclear negotiations, which has contributed to a risk-on sentiment in global markets [1][2][3]. Asian and European equity markets have posted strong gains, reflecting improved demand for riskier assets, while S&P 500 futures remain flat ahead of the US market opening [2].
The NZD/USD pair rallied for the second consecutive day, reaching session highs above 0.5900 after bouncing from lows around 0.5840 on Friday. Technical indicators such as the RSI (around 60) and MACD histogram suggest buyers retain control, with resistance near 0.5930 and further targets at 0.5965 and 0.6015. On the downside, support is seen at 0.5860 and 0.5840, with a break below bringing 0.5800 into focus [1]. The US Dollar was the weakest against the NZD, declining by 0.59% according to one source [1], and by 0.55% according to another [2].
Similarly, the AUD/USD pair surged to 10-day highs near 0.7190, buoyed by expectations that high energy prices will boost inflation and prompt the Reserve Bank of Australia (RBA) to hike rates next week. The US Federal Reserve (Fed) is expected to leave interest rates unchanged at 3.50%-3.75% during its upcoming meeting, with futures markets pricing a 66% chance that monetary policy will remain on hold by year-end. Rising inflationary pressures from the conflict have reduced expectations for rate cuts this year [3].
Societe Generale's Kit Juckes notes that the USD is soft due to hopes for a Gulf peace deal and the end of a Department of Justice probe into Fed Chair Powell. He suggests that a quick resolution to the conflict would likely lead to USD underperformance, while prolonged disruption to oil flows would benefit energy exporters. Juckes also highlights that the end of the DoJ probe could clear the way for Kevin Warsh to be confirmed as the next Fed Chair, potentially leading to greater Treasury/Fed cooperation and lower interest rates, as President Trump hopes [4].
There is a minor discrepancy regarding the exact percentage decline of the USD against NZD: Source 1 reports -0.59%, while Source 2 reports -0.55% [1][2].
CONCLUSION
The US Dollar has come under pressure as markets respond to optimism over a potential Iran peace deal and shifting central bank expectations. Both NZD and AUD have rallied strongly, with technical and fundamental factors supporting further upside. Analysts suggest that the USD could continue to underperform if the conflict resolves quickly, while prolonged disruptions may favor energy exporters. Overall, the market impact is high, with risk-on sentiment prevailing.