Dollar pulls back as US-Iran attacks pause, oil drops

In cryptocurrencies, bitcoin BTC= was up 0.9% at $65,193.62 while ether ETH= climbed 1.9% to $1,948.00.

Oil prices sank in early Asian trade, with Brent crude LCOc1 tumbling 4.7% to $92.19 after the U.S. military temporarily halted its two-week long strikes. Iran will halt its own attacks as long as the U.S. does the same, a senior Iranian official told Reuters on Sunday, following a China-led push to resume stalled diplomatic efforts in Pakistan to end the war.

"Market sentiment was supported by reports that Pakistan and Iran were exploring new peace talks with the U.S. and that oil exports from the Middle East continued to flow", Westpac analysts wrote in a research report. "Over the weekend, the U.S. paused strikes against Iran as tensions in the region continued to escalate."

Traders have increased their bets that the Federal Reserve could raise interest rates at its upcoming policy meeting, although the overall odds are little changed from Friday.

Fed funds futures are pricing an implied 36.3% probability of a 25-basis-point hike at the next two-day meeting ending on Wednesday, according to the CME Group's FedWatch tool.

The dollar slumped against its major peers at the start of Asian trading on Monday after the U.S. paused its bombing campaign in Iran during the weekend, prompting a drop in oil prices and boosting global investor confidence.

Against the yen JPY=, the U.S. dollar was down 0.2% at 163.585 yen, its biggest decline since July 10. The euro EUR= was up 0.2% at $1.1397, while the British pound GBP= rose by a similar magnitude to $1.3353.

In other major currencies, the New Zealand dollar NZD= was 0.3% higher at $0.5802, while its Australian counterpart AUD= climbed 0.2% to $0.6997.