U.S. dollar slips amid risk-on sentiment, but set for May advance on higher rates

The U.S. dollar turned lower on Friday, as risk sentiment outweighed safe haven demand after President Donald Trump said he will be meeting with his officials to make a final determination on a peace deal with Iran.

Still, the currency was headed for a solid monthly gain, driven by a bond sell-off and raised expectations for interest rate hikes. 

At 16:52 ET (20:52 GMT), the U.S. dollar index, which tracks the greenback against a basket of six major peers, was down 0.1% to 98.92. The euro inched up 0.1% to $1.1659, while the sterling added 0.1% to $1.3456.

Market participants on watch for U.S.-Iran peace deal

Traders on Friday were awaiting any confirmation or announcement of a peace agreement between Washington and Tehran, after Trump said he would be attending a meeting in the Situation Room to make a "final determination" on the deal. The president was referring to the White House’s dedicated crisis management center.

Trump said a deal would include Tehran agreeing that "they will never have a Nuclear Weapon or Bomb," an immediate reopening of the critical Strait of Hormuz with no tolls, and the removal of all mines in the waterway, after which the U.S. naval blockade of Iran’s ports and coastlines would be lifted.

"Ships caught in the Strait due to our amazing and unprecedented Naval Blockade, which will now be lifted, may start the process of ’heading home!’" the president posted on Truth Social. He added that the U.S. would help Iran in digging up its enriched uranium, or what he called "nuclear dust," and destroy it.

"No money will be exchanged, until further notice. Other items, of far less importance, have been agreed to. I will be meeting now, in the Situation Room, to make a final determination," Trump said.

However, Iran’s Fars News Agency said Trump’s comments were a "mixture of truth and lies," citing informed sources. Fars said there was no such clause that Iran had to reopen the strait without charging tolls. The agency also added that there was no mention of Iran giving up its nuclear materials in the deal.

Iran’s state media said no negotiations had taken place yet at this stage regarding Tehran’s nuclear program, citing foreign ministry spokesperson Esmaeil Baqaei.

The New York Times reported that Trump’s meeting in the Situation Room ran for two hours and ended with no decision, citing a senior administration official.

Against this backdrop, oil prices were lower on Friday. 

Dollar set for a nearly 1% rise in May

An agreement would represent the biggest breakthrough in a conflict that has dragged on since the end of February when the U.S. and Israel launched a joint assault on Iran. All sides have been locked in a protracted ceasefire since the beginning of April as negotiations have continued.

"Should crude oil prices continue to fall as a result of an opening of the Strait of Hormuz that comes with a ceasefire agreement, the beneficiaries (all else equal) will be the currencies of the energy importing countries, such as the EUR, GBP, and JPY. Those economies would otherwise have suffered most (in terms of real income growth) from even higher energy prices as supply buffers got depleted over the next few months," Thierry Wizman, global FX & rates strategist at Macquarie, said.