The dollar fell on Monday to its lowest level in 10 days against other major currencies, as reports of a peace agreement between the United States and Iran pushed oil prices lower and boosted demand for high-risk assets.
American and Iranian officials said on Sunday they had agreed on a peace framework to end the war between the two countries, lift US sanctions on Iran, and reopen the Strait of Hormuz. Brent crude futures fell by more than 4% to $83.82 per barrel.
Caution persisted, however, after US President Donald Trump told The New York Times on Sunday that if Iran did not reach a final deal with the United States on its nuclear programme, he would resume military strikes on Tehran or make the United States a "guardian of the Middle East" in exchange for 20% of the region's revenues.
The euro rose 0.35% in Asian trading to $1.1607, while sterling gained 0.3% to $1.3448.
The Australian dollar climbed 0.50% to $0.7075, while the New Zealand dollar rose 0.4% to $0.5854.
The dollar index, which measures the performance of the US currency against a basket of currencies including the yen and the euro, fell 0.31% to 99.492, its lowest level since June 5.
Nick Twidale, chief market analyst at ATFX Global in Sydney, said: "I think we will see the dollar decline over the next few sessions. We could see a slight rise in some high-risk currencies such as the Australian dollar and the yen. But I don't think we will see any major moves."
He added: "There will be a lot of waiting and watching to see how quickly the strait actually reopens and how long it takes for oil flows to return to normal. It will certainly take months, not weeks."
The yen retreated to 160.150 and continued to fluctuate around the 160 level, which is widely regarded as a red line for potential official intervention.