The US Dollar softened against both the New Zealand Dollar (NZD) and Japanese Yen (JPY) during Asian trading hours on Monday, following reports that the United States and Iran had reached a deal to end their conflict, halt the US blockade of Iran, and reopen the Strait of Hormuz [1][2]. US President Donald Trump announced that the US would lift its naval blockade on Iranian ports, with the agreement set to take effect on Friday [1]. Iran's National Security Council confirmed a ceasefire agreement, stating that final deal talks would begin after commitments under the memorandum of understanding are fulfilled [1]. The United Kingdom, France, Germany, and Italy indicated readiness to lift sanctions on Iran in response to steps on its nuclear program [1][2].
The NZD/USD pair appreciated to around 0.5850, recovering from minor losses in the previous session, as easing risk aversion supported the New Zealand Dollar despite ongoing domestic economic weakness [1]. New Zealand's BusinessNZ Performance of Services Index (PSI) fell to 47.5 in May from a revised 48.7 in April, marking the fourth consecutive month of contraction. The Performance of Composite Index also declined from 49.2 to 48.4, its third straight month of contraction and steepest drop since June 2025 [1].
Meanwhile, the USD/JPY pair traded flat near 160.20, with the Japanese Yen showing little movement despite the US Dollar's softness and the geopolitical developments [2]. Market participants are focused on upcoming central bank decisions, with the Federal Reserve expected to keep its key interest rate unchanged at its June policy meeting on Wednesday, and the Bank of Japan (BoJ) widely anticipated to raise its benchmark interest rate to the highest level since 1995 [2]. A Reuters poll cited in the article projects the BoJ to hike rates to 1.0% in June and to 1.25% in the fourth quarter [2].
Analyst Nick Twidale, chief market strategist at ATFX Global in Sydney, commented, "I think we'll see the dollar fall over the course of the next few sessions. We'll probably see some of the risk currencies like Aussie and yen appreciate a little bit. But I don't think we're going to see any huge moves" [2]. Despite the easing of geopolitical tensions, caution remains as President Trump warned that military action against Tehran could resume if a final nuclear accord is not reached [2].
CONCLUSION
The US-Iran peace deal has eased market tensions, leading to a stronger New Zealand Dollar and a steady Japanese Yen, though domestic economic data in New Zealand remains weak. Market attention now shifts to upcoming central bank decisions, with the Fed expected to hold rates steady and the BoJ likely to implement a significant rate hike. Overall, the market reaction has been moderate, with analysts expecting limited currency moves in the near term.