US dollar tumbles as Iran peace deal sparks massive global risk rally

The US dollar touched its weakest level since June 5 on Monday, after a tentative US-Iran peace framework drove a broad unwind of safe-haven positions. The dollar index settled around 99.55 in Asian trade, having slid through the session.

The deal unlocks the Strait of Hormuz and caps Iran's nuclear program. Crude oil dropped 4%, easing the inflation pressure that had been a tailwind for the greenback. Lower oil reduces imported energy costs for Europe and Asia, a shift that supports currencies that had been under pressure from the energy shock.

Traders described the move as a classic unwind of the long-dollar, short-risk trade built up over the past month. The dollar had rallied as the Iran talks stalled and oil prices climbed. The framework agreement hit both catalysts at once. "The market was positioned for a breakdown, not a deal," one London-based FX trader said. "The unwind is violent because everyone was on the same side."

The euro climbed above $1.0950 for the first time in two weeks. Sterling pushed through $1.2800. The yen, which had also drawn safe-haven flows, gave back some of those gains as the risk-on mood lifted carry trades. The Australian dollar rose 0.8% against the greenback, its best single-day gain in a month.