Dollar Set For Sharp Fall Ahead of Iran–US Talks

By Staff, Agencies

The US dollar is heading for its biggest weekly decline since January on Friday, as global currencies strengthen on cautious optimism over the Gulf ceasefire and hopes of improved global energy flows through the Strait of Hormuz.

Meanwhile, markets are closely watching upcoming Iran–US talks expected in Islamabad, Pakistan, as both sides prepare to discuss prospects for a “lasting peace” aimed at easing tensions that rattled global markets in March.

Earlier, the dollar surged last month as a safe-haven during the US–“Israeli” escalation against Iran, which drove oil prices higher and hit global equities and gold, but has since reversed as the ceasefire shifted sentiment.

As a result, the dollar index is down about 1.3% this week, while the euro, pound, and commodity currencies have strengthened.

However, despite improved sentiment, concerns persist over global energy flows, with only one oil tanker and five cargo ships passing through the Strait of Hormuz in the first 24 hours of the ceasefire, compared with a pre-war average of around 140 vessels daily.

Analysts warn the situation remains fragile, saying any breakdown in weekend talks could quickly reverse recent gains and renew market volatility.

In parallel, the Chinese yuan rose to its strongest level since 2023, an unexpected gain during the war period despite China being the world’s largest oil importer.

Economists say its rise reflects shifting currency dynamics amid geopolitical tensions, as investors reassess exposure to major currencies during regional instability.

Similarly, International Monetary Fund [IMF] Managing Director Kristalina Georgieva warned that the war on Iran and wider West Asia conflict will weigh significantly on global growth this year due to disrupted energy infrastructure and supply chains.

Ahead of the IMF and World Bank spring meetings, Georgieva said the global economy will not return to pre-war conditions, adding that “even in a best case” there will be no “neat and clean return to the status quo ante,” with slower growth even under a durable peace.

Meanwhile, the IMF said a fragile two-week US–Iran truce could limit near-term damage, but Georgieva warned the war’s impact is already “embedded” in global markets.

Overall, the IMF had projected global growth at 3.1% this year, but Georgieva said forecasts are now likely to be revised down due to the war’s impact on energy markets.