Dollar drifts lower as oil falls on Hormuz deal optimism

By Gregor Stuart Hunter and Lucy Raitano

SINGAPORE/LONDON, May 25 (Reuters) - The dollar dropped against large currencies connected Monday arsenic hopes of a woody to reopen the Strait of Hormuz pushed lipid prices beneath $100 per barrel, adjacent arsenic the U.S. ‌and Iran played down the chances of reaching an statement soon.

Many markets - including successful the U.S., Hong Kong, Britain and ‌much of the remainder of Europe - were closed for nationalist holidays, reducing liquidity.

Against the yen, the dollar was down 0.2% astatine 158.91 yen.

Japan volition physique up an other $19 ​billion successful reserves to subsidise substance costs and assistance tackle cost-of-living pressures, Prime Minister Sanae Takaichi said connected Monday, portion looking to assuage enslaved marketplace concerns by promising nary other borrowing overall. The supplementary fund was archetypal reported earlier this month.

The euro roseate 0.33% to $1.1641 and the British lb gained 0.55% to $1.3499. The Australian dollar precocious 0.58% to $0.717, portion its kiwi counterpart tacked connected 0.5% to $0.5874.

The U.S. dollar scale fell astir 0.3% to ‌98.969.

U.S. AGREEMENT WITH IRAN DRAWING CLOSER?

As diplomatic efforts to ⁠find a solution to the Iran warfare continue, U.S. Secretary of State Marco Rubio said determination would either beryllium a bully statement oregon Washington would woody with the state successful "another way".

Iran's overseas ministry spokesperson said conclusions ⁠had been reached connected galore topics discussed successful a imaginable memorandum of knowing with the U.S., but this did not mean Tehran was adjacent to signing an agreement.

"If and erstwhile a bid woody is secured, the USD volition weaken for a period. However, erstwhile that impulse washes through, the USD ​will ​re‑strengthen due to the fact that of its amended fundamentals against the large currencies," wrote Samara Hammoud, ​international economist and currency strategist astatine CBA.

Oil markets tumbled ‌on hopes of a bid deal, with Brent crude prices down 5% to $98.43 a barrel, portion U.S. West Texas Intermediate was astatine $88.83 a barrel, disconnected 4.8%.

Over the weekend, determination were conflicting signals implicit the likelihood of a deal. U.S. President Donald Trump said connected societal media connected Saturday that a memorandum of knowing connected a bid woody with Iran had been "largely negotiated," with some countries and mediators successful Pakistan reporting progress.

However, connected Sunday Trump said connected Truth Social that the U.S. blockade connected Iranian ships successful the Strait of Hormuz would "remain successful afloat unit and ‌effect until an statement is reached, certified, and signed".

"Markets person go conditioned to ​be incredibly diligent connected a tangible breakthrough, but the basal lawsuit of a ​deal remains firm, with the play quality providing further conviction, adjacent ​if the timing remains unclear," said Chris Weston, caput of probe astatine Pepperstone Group Ltd successful Melbourne.