Asian currencies broadly firmed on Monday, benefiting from weakness in the dollar and oil prices

The dollar softened on Monday, while Asian currencies firmed as encouraging comments on a potential Iran-U.S. peace deal helped spruce up risk appetite.

Trading volumes were muted on account of holidays in South Korea, Hong Kong, and the U.S.

But market sentiment improved after reports over the weekend flagged some progress towards an Iran-U.S. peace deal, with oil prices dropping sharply on Monday.

The dollar index and dollar index futures declined 0.2% apiece on Monday, dropping after logging some gains last week.

The U.S. president said over the weekend that the U.S. and Iran had largely negotiated a framework agreement to end their conflict and reopen the Strait of Hormuz.

Separate reports showed Iran and the mediators also flagging progress in talks.

But the U.S. president later said he was in no rush to finalize a deal. Iran also largely rejected some U.S. demands.

Despite the mixed signals, markets still cheered a potential end to the Iran war, sending oil prices sharply lower. This weighed on the dollar, as markets priced out expectations of prolonged energy-fuelled inflation that could drive up interest rates later in the year.

Asian currencies broadly firmed on Monday, benefiting from weakness in the dollar and oil prices.

The Indian rupee’s USD/INR pair was among the best performers, dropping 0.5% and retreating sharply from record highs after Reserve Bank of India Governor Sanjay Malhotra said the rupee appeared undervalued and that the central bank will do “whatever is required” to stabilize currency markets.

The RBI had intervened earlier in May, selling tens of billions of dollars to stem weakness in the rupee. But intervention only brought limited relief to the rupee.

Other Asian currencies also firmed after losing some ground last week. The yen’s USD/JPY pair declined 0.2%, while the yuan’s USD/CNY dropped 0.2%.