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The U.S. dollar edged lower on Wednesday and was fluctuating narrowly on either side ⁠of unchanged throughout the day as investors assessed the likelihood that peace talks between Iran and the United States would resume shortly.

U.S. President Donald Trump said the war with Iran was close to over, as the army chief of mediator Pakistan arrived in Tehran to try to prevent a renewed outbreak of hostilities.

A source told Reuters that Israel expects a two-week ceasefire, agreed to last week with the Iranians, to be extended as U.S. and Iranian officials weighed a return to Pakistan for further talks. White House press secretary Karoline Leavitt told reporters that reports the White House had requested an extension of the ceasefire ⁠in ‌the Iran war were wrong.

The war has effectively throttled the Strait of Hormuz, ⁠a crucial waterway for one-fifth of global oil and gas shipments as well as other key products such as fertilizer, since the U.S.-Israeli attacks on Iran began on February 28. That has sent oil prices surging and ignited concerns about the hit to global growth and inflation.

“We’re trying to figure out if negotiations are going to continue, if the ceasefire will continue, and if ‌ultimately tensions can be established as solidified or eased, but no one knows exactly where things are going,” said Juan Perez, senior director of trading at Monex USA.

“Not only are we at the mercy of the headlines over the conflict, but now the focus is going to be on economic growth.”

Dollar index fades

The dollar index, which measures the greenback against a basket of currencies, shed 0.01% on the day to 98.06 after climbing as high as 98.286. The session low was 98.005.

U.S. crude oil rose 0.13% to $91.39 a barrel and Brent ticked up to $94.87 per barrel, a gain of 0.06% on the day.

Four sources told Reuters the European Central Bank (ECB) policymakers are wary ⁠about raising interest rates as soon as this month, as they have yet to see firm evidence that an energy-induced inflation shock is becoming broad-based or entrenched. The euro was ‌last up 0.03% at $1.1799.

ECB policymaker Joachim Nagel said on Wednesday the situation surrounding the Strait of Hormuz ‌will be crucial in informing the central bank’s next policy decision, while fellow policymaker José Luis Escrivá said its baseline scenario for the economy, which envisages a short-lived impact from the Iran war, is materializing on the energy market.

The dollar index had dropped as low as 97.968 on Tuesday, its weakest level since March 2, the first trading day after ⁠the U.S.-Israeli war with Iran began, but investors said robust demand for U.S. assets and waning prospects for U.S. interest rate cuts should buttress ⁠it against sharper declines. The decline puts the dollar index on track for an eighth straight daily loss, 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.

Economic data

U.S. Treasury Secretary Scott Bessent told CNBC the economy will be slower this quarter with the Iran war, but that it is in good shape and will rebound. ‌He added that oil prices do not appear to be raising inflation expectations. The U.S. Labor Department said import prices rose 0.8% last month after a downwardly revised 0.9% gain in February, short of the 2% rise forecast by economists polled by Reuters. In the 12 months through March, import prices shot up 2.1%.

Cleveland Fed President Beth Hammack said that while she sees no imminent need for the U.S. central bank to change its interest rate target-setting, future cuts or even hikes were possible. Against the yen, the dollar strengthened 0.18% to 159.05, moving closer to the 160 level ‌that has sparked past interventions in the currency market by Japanese officials. Sterling strengthened 0.06% against the greenback to $1.3572.