The dollar has lost some of its appeal as a safe haven due to speculation that the war in the Middle East may be limited, leading to a drop in extremely high oil prices and a rise in risky assets.
The dollar was at 157.73 yen and 1.1632 against the euro at the start of Asian trading, but retreated from its highest levels of the previous day after US President Donald Trump told CBS News that Washington was “much ahead” in the war on Iran than his initial estimate of four to five weeks.
The Iranian Revolutionary Guard quickly rejected these statements, describing them as “nonsense,” but they apparently prevented traders from fueling fears of an oil shock and put them in a wait-and-see position.
Brent crude futures were at $92.46 a barrel in Asian morning trading, down from a high of $120 on Monday.
The risk-sensitive Australian dollar settled at around $0.7068 after hovering in the 70-cent range since the outbreak of the war.
The dollar was a preferred haven for traders, as US and Israeli attacks on Iran froze oil and gas exports through the Strait of Hormuz, driving up energy prices.
Investors fear that this will restrict global growth by imposing taxes on businesses and consumption, while simultaneously pushing central banks away from easing interest rates.
The British pound recovered from its decline on Monday to settle at $1.3412, and the New Zealand dollar settled at $0.5932.