The US dollar weakened on Monday as shifting geopolitical signals from the Middle East tempered safe-haven demand ahead of a series of key central bank meetings expected later this week. The movement reflects a cautious market mood shaped by uncertainty around global growth, oil supply risks, and monetary policy direction in advanced economies.

The currency market also reacted to reports suggesting renewed diplomatic activity over the Strait of Hormuz, a critical global energy route that typically accounts for about one-fifth of global oil and gas shipments. Investors remain sensitive to developments in the region, given their direct impact on energy prices and inflation expectations.

Brent crude futures also edged higher by about 1% to $106.40 per barrel, reinforcing concerns that energy markets remain vulnerable to geopolitical disruptions even as some optimism emerges around potential de-escalation efforts.

Reuters reported that the US dollar index, which measures the greenback against a basket of six major currencies, fell 0.3% to 98.32, reflecting mild profit-taking and reduced demand for safe-haven assets.

The Japanese yen traded at 159.17 per dollar, just below the key 160 level. Markets continue to price in a likely Fed pause at its upcoming meeting.

The data highlights a market in transition, where geopolitical optimism is beginning to offset earlier risk-off positioning that had supported the dollar in previous weeks. Market analysts say the dollar’s recent weakness reflects a combination of easing geopolitical risk sentiment and positioning ahead of the US Federal Reserve’s policy decision, where rates are widely expected to be left unchanged.