US Dollar Index holds losses near 99.50 as US-Iran talks face uncertainty

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, inches lower after two days of gains and is trading around 99.60 during the Asian hours on Thursday.

The Greenback struggles as traders are watching Middle East developments closely, with uncertainty surrounding efforts to end the Iran conflict. The White House stated that talks are ongoing, with the Trump administration reportedly sending a 15-point proposal to Iran via Pakistan to resolve the conflict.

Senior Iranian officials are reviewing the US proposal, but have signaled no willingness to engage in talks with Washington. However, Tehran indicated it would reject a US ceasefire offer, instead putting forward a five-point plan that includes sovereign control over the Strait of Hormuz.

TD Securities strategists Oscar Munoz and Eli Nir note that the Federal Reserve (Fed) faces mixed signals as the Iran conflict triggers an oil shock. They add that the US economy remains uneven, with the dual mandate still in tension, and expect the Fed to remain on hold in the near term before potentially cutting rates later in 2026 if conditions permit.

Conflict-related disruptions have driven energy prices higher, stoking inflation concerns and reinforcing expectations that the Federal Reserve will keep rates steady this year. Investors now look to Thursday’s weekly Initial Jobless Claims for fresh labor market signals.