Dollar ticks up on safe haven demand amid uncertainty over U.S.-Iran peace talks

The U.S. dollar ticked higher on Monday, boosted by a renewed bout of safe haven demand after Iran said it would suspend mediated negotiations with the U.S. following fresh strikes and an Israeli military operation in Lebanon.

President Donald Trump attempted to calm tensions somewhat after saying a planned Israeli attack on Lebanon’s capital city Beirut would not take place and that talks with Iran were ongoing.

The dollar is coming off a nearly 1% rise for May, helped by its attractiveness as a safe haven asset and expectations for higher interest rates.  

At 16:40 ET (20:40 GMT), the U.S. dollar index, which tracks the greenback against a basket of six major peers, gained 0.3% to 99.20. 

In other currencies, the the euro was down 0.2% to $1.1633 and the sterling held steady at $1.3457. The Japanese yen weakened, with the USD/JPY pair up 0.3% to 159.66, approaching the key 160 level. Hitting that mark could once again prompt Tokyo to intervene. 

Trump says talks ’continuing’ despite Iran’s suspension of messages

Expectations of an imminent deal between Washington and Tehran to bring an end to their three-month old conflict capped gains in the dollar in May, but those hopes took a dent on Monday.

Iran’s semi-official Tasnim News Agency said it had learned that Tehran’s negotiating team was suspending "dialogues and exchange of texts through a mediator" with the U.S., citing the military action in Lebanon and a violation of an ongoing ceasefire with Washington on all fronts, including Lebanon. Tasnim added that Iran was also going to "completely block" the critical Strait of Hormuz.

Trump told NBC News that he had not "received word" that Iran had suspended talks. Trump later on Truth Social said that "talks are continuing, at a rapid pace" with Iran.

Tehran’s move came after the U.S. military said it had conducted self-defense strikes on radar and drone control sites in Iran over the weekend. U.S. Central Command said the strikes were in response to "aggressive Iranian actions" including the shooting down of an American MQ-1 drone. CENTCOM also said on Sunday it had intercepted two Iranian missiles targeting U.S. bases in Kuwait.

Tehran’s move also came after Israel pushed to expand its occupation of a section of neighboring Lebanon, responding to drone launches by Iran-aligned Hezbollah militants. Israel also ordered strikes on southern suburbs in Lebanon’s capital city Beirut, but Trump later on Truth Social said that there would be no Israeli attack in Beirut after a call with Prime Minister Benjamin Netanyahu.

Axios reported that the Lebanese parliament speaker had told the Trump administration on Sunday that Hezbollah was ready for a full and immediate ceasefire with Israel, citing U.S. officials, who said they don’t believe Netanyahu would agree.

Netanyahu on social media said that he had told Trump that Israel would attack terror targets in Beirut if Hezbollah did not cease their attacks. "This stance of ours remains unchanged. In parallel, the IDF will continue to operate as planned in southern Lebanon," the Israeli leader said.