The dollar slipped Monday but held near two-month highs after Iran and Israel agreed to halt attacks on each other, following an appeal by President Trump.
The pause in direct confrontation drew investors back into currencies battered by strong U.S. jobs data Friday, which had boosted bets on a Federal Reserve rate hike this year. The euro edged up to $1.1531, while the pound rose to $1.3390.
Weekly data to June 4 shows investors cut bullish euro positions to a three-month low and added bearish yen bets exceeding $10 billion. The Federal Open Market Committee meets next week under new Chair Kevin Warsh, with markets pricing in a 40% chance of a rate increase by October. All eyes are on U.S. inflation data Wednesday for Fed guidance.
The European Central Bank is expected to raise rates this week, with another hike likely in September, balancing energy-driven inflation against a weakening economy.
The dollar index fell 0.07% to 100. The yen strengthened 0.1% to 160.17 per dollar, hovering near the key 160 level-a psychological trigger for potential Japanese intervention.