* Dollar index falls to lowest since February, euro and

sterling strengthen

* Oil prices plunge over 10% as Strait of Hormuz reopens,

easing supply concerns

* Fed rate cut expectations rise, Bank of England and

Bank of Japan signal caution

(Updates to morning New York trading)

By Chuck Mikolajczak

NEW YORK, April 17 (Reuters) - The U.S. dollar fell on

Friday and was on track for a second consecutive weekly decline,

extending losses after Iran said the Strait of Hormuz was open,

raising hopes the Middle East conflict is nearing an end.

Iranian Foreign Minister Abbas Araqchi said in a post on X

the strait was open to all commercial vessels for the remainder

of a U.S.-brokered 10-day truce agreed between Israel and

Lebanon involving Israel and Iran-backed Hezbollah.

Shortly after Araqchi's statement, U.S. President Donald

Trump posted on Truth Social: "IRAN HAS JUST ANNOUNCED THAT THE

STRAIT OF IRAN IS FULLY OPEN AND READY FOR PASSAGE".

"Nobody in their right mind, and certainly not the

administration, trusts anything that Iran says, but actions do

matter," said Joseph Trevisani, senior analyst at FXStreet in

New York.

"This entire thing that's been going on since the war, of

course, is all news-driven, that's the whole story. And what

you're seeing here is a resolution or a potential resolution

that the markets are going to love."

DOLLAR HITS LOWEST SINCE FEBRUARY

The dollar index, which measures the greenback

against a basket of currencies, fell 0.49% to 97.73 after

earlier dropping to 97.632, its lowest since February 27, before

the war began. The index was down 1% on the week, set for a

second straight weekly decline. Over the past two weeks, it has

fallen about 2.5%, its largest two-week drop in a year.

The euro was up 0.48% at $1.1838 after touching

1.1848, its highest since February 18. The single currency was

up 2.7% on the week, its biggest weekly percentage gain in a

year and on course for a third consecutive weekly rise.

U.S. crude plummeted 11.53% to $83.77 a barrel, while

Brent plunged to $88.80 per barrel, down 10.65% on the

day.

Expectations for an interest rate cut of at least 25 basis

points by the Federal Reserve at its December meeting jumped to

44.9%, according to CME's FedWatch Tool, up from 29.5% in the

previous session.

Sterling strengthened 0.37% to $1.3574. Bank of

England Chief Economist Huw Pill criticized his colleagues'

"wait and see" messaging on holding policy steady while the Iran

war plays out, saying tackling inflation should remain the main

focus despite competing trade-offs.

Against the Japanese yen, the dollar weakened 0.63%

to 158.18 after earlier climbing to 159.86. Bank of Japan

Governor Kazuo Ueda steered clear of signaling a rate hike was

on the cards this month, instead pointing to low real interest

rates and robust corporate profits, reinforcing expectations the

bank will hold policy steady at least until June.