The U.S. dollar fell on Tuesday after President Donald Trump announced a ceasefire between Israel and Iran, in news that sparked a risk rally and a sharp drop in oil prices.

Trump announced a complete ceasefire between Israel and Iran, potentially ending the 12-day conflict that led millions of people to flee Tehran and prompted fears of further escalation in the war-torn region.

Israel has agreed to Trump's proposal, saying it has achieved its goal of removing Tehran's nuclear and ballistic missile threat.

The yen and euro benefited from a sharp fall in oil prices as both the European Union and Japan rely heavily on imports of oil and liquefied natural gas, while the U.S. is a net exporter.

Against the yen, the dollar was down 0.75% at 145.03.

The euro rose 0.27% to $1.1609. It hit $1.1632 a couple of weeks ago, its highest level since October 2021.

Adding to the pressure on the dollar were dovish comments from Federal Reserve policymaker Michelle Bowman, who said the U.S. central bank should consider interest rate cuts soon, triggering a fall in U.S. Treasury yields.

Fed Governor Christopher Waller said in a television interview last week that he would consider a rate cut at next month's meeting as well.

Markets are now pricing in close to a 23% chance the Fed could ease rates in July, up from 14.5% a day ago, according to the CME FedWatch tool.

Against a basket of currencies, the dollar was down 0.14% at 98.09, extending its more than 0.5% decline in the previous session.

Fed Chair Jerome Powell is due to testify before the U.S. Congress on Tuesday and Wednesday, where focus will be on the outlook for U.S. rates.

The risk-sensitive Australian dollar got a lift and last traded 0.7% higher at $0.6506 as did the New Zealand currency, which rose 0.75% to $0.6025.

In cryptocurrencies, bitcoin rose 2% to $105,832, while ether jumped 3.2% to $2,425, in a reflection of the positive risk sentiment.

Source: Reuters