The dollar fell on Tuesday while the Australian and New Zealand dollars rose after U.S. President Donald Trump announced a ceasefire between Israel and Iran, in news that cheered investors and sparked a risk rally across markets.

Trump said a "complete and total" ceasefire between Israel and Iran would go into effect with the aim of ending the 12-day conflict between the two countries, moments after both sides threatened new attacks.

An Iranian and Qatari official confirmed that Tehran had agreed to the ceasefire, while Israel's Channel 12 reported that Prime Minister Benjamin Netanyahu had agreed in talks with Trump to a ceasefire as long as Iran halted its attacks.

The risk-sensitive Aussie was buoyed by the news and was last trading 0.35% higher at $0.6483 as was the kiwi, which rose 0.37% to $0.5998. "It's certainly positive news for risk sentiment," said Rodrigo Catril, senior currency strategist at National Australia Bank.

"We obviously need to have a little bit more detail in terms of what this actually means... I think it's going to be the terms of a ceasefire, and what are the terms of a more durable peace deal."

The dollar, which had been supported last week by safe-haven demand, fell broadly after the news.

Against the yen, the greenback was down 0.21% at 145.79.

The euro rose 0.21% to $1.1602 and sterling rose 0.18% to $1.3551.

Trump's comments on his Truth Social website came after Iran launched a missile attack on a U.S. air base in Qatar on Monday that caused no injuries, in a move he dismissed as a "weak response" to the U.S. attack.

Adding to the dollar's drag were dovish comments from Federal Reserve policymaker Michelle Bowman, who said the U.S. central bank should consider cutting interest rates soon.

Bowman's openness to cutting rates soon was supported by Fed Governor Christopher Waller, who said in a television interview last week that he would also consider cutting rates at next month's meeting.

"There seems to be increasing division within the Fed board ahead of Fed Chairman Powell's testimony," said Tony Sycamore, a market analyst at IG.

"The odds of a July cut… are still too low. I think they should be higher than that."

The market is now pricing in about a 20% chance the Fed could cut rates in July, up from 14.5% a day ago, according to the CME FedWatch tool.

Fed Chairman Jerome Powell is due to testify before the U.S. Congress on Tuesday and Wednesday, with the focus on the outlook for U.S. interest rates. (alg)

Source: Reuters