The dollar extended its decline against major currencies on Friday, heading for its first weekly loss in three weeks, following reports that the US and Iran have reached an agreement to extend the ceasefire in the Middle East and lift shipping restrictions through the Strait of Hormuz.
The deal, still pending President Trump's approval, would extend the truce for another 60 days and allow traffic through the strategic waterway while negotiators tackle issues like Iran's nuclear program, four sources told Reuters.
Oil prices fell and demand for the safe-haven dollar waned, although moves were tempered as investors remained cautious about a lasting resolution.
The euro edged up to $1.1653, the pound was flat at $1.3445, and the yen strengthened to 159.27, pulling away from the 160-per-dollar level that has historically triggered Japanese intervention.
The dollar index was flat at 98.997, on track to end the week 0.3% lower.
"It might well be that once this crisis in Iran, in the Middle East, is behind us, we expect the U.S. dollar to remain weak," said Massimiliano Castelli, head of strategy in the global sovereign markets team at UBS Asset Management.
US inflation accelerated in April at its fastest pace in three years, driven by higher energy prices from the Iran war, reinforcing expectations the Federal Reserve will hold rates steady into next year.