⁠The safe-haven dollar fell on Tuesday and was on pace for a seventh straight daily decline as investors were optimistic ‌that a resolution between the U.S. and Iran on a peace deal could be reached, while a reading on inflation came in cooler than expected.

Negotiating teams ​from the U.S. and Iran could return to Islamabad this week to resume talks to end the war, sources told Reuters, after the collapse of weekend ​negotiations prompted Washington ​to impose a blockade on Iranian ports in the Strait of Hormuz.

"You have very clear guidance coming from the Trump administration that they're looking for an exit ramp here and that's playing into market expectations that there will eventually be a ⁠symbolic deal between the U.S. and Iran that allows attacks to cease and for Iran to let the strait reopen," said Karl Schamotta, chief market strategist at Corpay in Toronto.

"The second thing that's important, at least in the context of the foreign exchange markets, is that there's just generally a lack of conviction - traders are not willing to place large directional bets on anything happening, given that they can be whipsawed ​or wrong-footed by the ‌next tweet from ⁠the White House."

OIL PRICES TUMBLE ON ⁠PEACE HOPES

U.S. crude fell 4.36% to $94.75 a barrel and Brent dropped to $96.72 per barrel, down 2.62% on the day.

The dollar index, which measures ​the greenback against a basket of currencies, slipped 0.3% to 98.05, with the euro up 0.36% at $1.1799. The ‌dollar had dropped as low as 97.978 on the day, its weakest since March ⁠2, the first trading day after the U.S.-Israeli war with Iran began.

The greenback has fallen more than 2% during its seven-session streak of declines, its longest since a nine-session skid that ended on December 3 when investors were largely expecting at least two rate cuts from the Federal Reserve this year.

Chicago Federal Reserve President Austan Goolsbee said interest-rate cuts may need to wait until 2027, depending on how long oil prices stay high.

INFLATION DATA BEATS FORECASTS

The dollar extended declines after data from the U.S. Labor Department showed the Producer Price Index (PPI) for final demand rose 0.5% last month, short of the estimate of economists polled by Reuters calling for a 1.1% increase, after a downwardly revised 0.5% gain in February.

In the 12 months through March, the PPI advanced 4.0% after increasing 3.4% in February. A ‌rate hike is not self-evident at the European Central Bank's next policy meeting on ⁠April 30, ECB policymaker Olli Rehn said, adding that the ECB was closely monitoring the ​Middle East conflict and its spillover effects on the economy.

Sterling strengthened 0.56% to $1.3579 against the dollar after reaching 1.3589, its highest since February 17, while the dollar was down 0.38% against the Japanese yen to 158.83.

The chance of a rate hike this month by the Bank of Japan, once seen ​as a strong possibility, ‌has receded, with policymakers divided as the war keeps markets volatile and muddies the economic outlook, sources ⁠told Reuters.

(Reporting by Chuck Mikolajczak; additional reporting by ​Sophie Kiderlin in London and Satoshi Sugiyama in Tokyo; Editing by Shri Navaratnam, Kevin Buckland, Barbara Lewis and Chizu Nomiyama)