Dollar set for biggest weekly drop since Jan

The dollar slipped on Friday, putting it on track for its largest weekly drop ​since January, as investors sold safe-haven assets on the assumption that oil shipping will resume if a ceasefire holds in the ‌Gulf.

The dollar had towered in March as one of the few bastions of safety as the Iran war sent oil prices surging and hit stocks and gold, while inflation worries pressured bonds.

But since a fragile ceasefire was reached on Tuesday, those positions are being unwound.

The euro has rallied 1.8 percent this week to trade at $1.173, while sterling ​has gained 2 percent since Monday to $1.347.

The risk-sensitive Australian and New Zealand dollars are set for weekly rises of nearly 3 percent on ​the dollar, with the Aussie trading just above 70 cents.

MARKETS ARE OPTIMISTIC EVEN THOUGH CEASEFIRE IS FRAGILE

“The market still seems generally optimistic, despite some of the ceasefire fraying,” said Marc Chandler, chief market strategist at Bannockburn Global Forex.

Data on Friday showed ​that US consumer prices rose by the most in nearly four years in March as the Iran war boosted oil prices and the pass-through from tariffs ​persisted.

The increase was largely in line with expectations and the markets’ direction is more likely to hinge on the outcome of weekend peace talks between the US and Iran in Islamabad, analysts said.

“People were buying the US dollar when the war was at its most intense moment and now they’re selling as the tail risk ​of a really bad outcome has faded quite a bit,” said Jason Wong, senior strategist at BNZ in Wellington.

“Even though it still looks ​a bit shaky, the ceasefire removing that tail risk is important from a sentiment point of view,” he said, adding that the mood could turn very quickly ‌if the ⁠anticipated weekend peace talks fail to deliver progress.