The US dollar declined for the second consecutive day on Wednesday amid growing expectations of a potential ceasefire in the ongoing conflict in the Middle East, after the United States indicated that the end of the war may be near, although markets remained cautious amid fears of possible renewed escalation.

The White House said that US President Donald Trump will address the nation to provide an important update on Iran at 09:00 PM Eastern Time on Wednesday (01:00 GMT Thursday).

Trump said on Tuesday that the United States could end its military campaign against Iran within two to three weeks, while US Secretary of State Marco Rubio told Fox News that Washington may see the finish line in the war with Iran.

Expectations of a ceasefire have led to a reversal of some of the most widely traded market positions since the outbreak of the war in late February.

The Japanese yen recovered part of its losses after rebounding from its lowest level this year at 160.46 per dollar, moving back above the key psychological level of 160, which had previously raised concerns about potential intervention by Japanese authorities in currency markets. Meanwhile, the euro reached its highest level in a week.

The dollar index which measures the US currency against a basket of currencies including the yen and the euro fell 0.1% to 99.60, hitting its lowest level in a week after declining 0.65% on Tuesday.

Kirstine Kundby-Nielsen, a foreign exchange analyst at Danske Bank, said: Markets are increasingly adopting the view of broader de-escalation in the Middle East.

She added: Markets are optimistic. We are seeing some relief with lower interest rates and higher equities, and the price action in euro/dollar reflects that well.

The euro rose 0.3% against the dollar to $1.1583, after gaining 0.8% on Tuesday.

The Japanese yen also rose 0.1% to 158.65 per dollar, while the British pound climbed 0.3% to $1.3265.

At the same time, there were signs of continued escalation in the conflict. US Defense Secretary Pete Hegseth said that the coming days in the war against Iran will be decisive, warning Tehran that the conflict will escalate if no agreement is reached.

Meanwhile, attacks occurred on multiple fronts on Wednesday, with drones striking fuel tanks at an international airport, while an oil tanker was hit by an unidentified projectile off the Qatari capital Doha.

The US dollar had benefited from safe-haven demand since the start of the conflict in late February. The United States as a net energy exporter is also relatively better positioned to handle oil supply disruptions compared to other countries.

Brent crude futures fell below $100 per barrel on Wednesday, although they were last trading around $100.40.

Focus on jobs data

The main economic focus in the United States this week is the March jobs report, due on Friday. The report is expected to show that employers added about 60,000 jobs during the month, according to the median estimate of economists surveyed by Reuters, following an unexpected loss of about 92,000 jobs in February.

A sharp deterioration in the labor market would likely revive expectations for Federal Reserve rate cuts this year, which have largely faded amid rising oil prices due to the war with Iran, increasing inflation concerns.

Markets are currently pricing around 13 basis points of monetary easing from the Federal Reserve this year, implying roughly a 50% probability of a quarter-point rate cut in 2026.

As for the yen, the Japanese currency remained little changed after the Bank of Japans quarterly Tankan survey showed an improvement in business sentiment among large Japanese manufacturers during the three months through March, although companies expect conditions to deteriorate in the next three months.

Sho Suzuki, a market analyst at Matsui Securities, said that the dollar is likely to remain supported by the Federal Reserves cautious stance on rate cuts, while the yen is supported by rising expectations of a Bank of Japan rate hike in April.

He added: We may see a tug of war between dollar strength and yen strength, with dollar/yen trading sideways in the upper 150s range.

The Australian dollar rose 0.4% to $0.6930, while the New Zealand dollar gained 0.2% to $0.5756.