US Dollar Index (DXY) eases from YTD peak, trades below 100.50 on Iran de-escalation hopes

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, retreated from its highest level since May 2025, touched during the Asian session this Tuesday, snapping a five-day winning streak. The index, however, lacks follow-through selling amid contrasting headlines over peace talks to end the war in the Middle East and currently trades around the 100.40-100.45 region, down less than 0.10% for the day.

The Wall Street Journal ​reported ​on Monday that US President Donald Trump is willing to end ​the military ​campaign against Iran even if the ​Strait of ​Hormuz remains largely closed. The headlines trigger a turnaround in the global risk sentiment, which, in turn, is seen undermining the safe-haven USD. Furthermore, a corrective pullback in Crude Oil prices helps ease inflationary concerns and keep US Treasury bond yields on the defensive, turning out to be another factor weighing on the Greenback.

Meanwhile, Trump issued a stark warning that the US could launch massive strikes on Iran's key energy infrastructure if a deal is not reached soon and if the Strait of Hormuz is not immediately reopened to commercial traffic. Moreover, Iran has signaled reluctance to engage in direct negotiations with the US, highlighting fragile diplomatic progress. Adding to this, the US is still deploying additional troops and assets to the region, fueling uncertainty about a quick de-escalation of tensions in the region.

This should act as a tailwind for Crude Oil prices, which keeps inflation risks and bets for a rate hike by the US Federal Reserve (Fed) in play. The hawkish outlook, in turn, should help limit deeper losses for the USD and warrants some caution before confirming that the index has topped out in the near term. Traders now look to the US economic data – JOLTS Job Openings and the Conference Board's US Consumer Confidence Index, for a fresh impetus later during the North American session.