It weakened again after April 7, the start of a ceasefire, which Donald Trump threatened on Monday to ​end, dismissing Iran's proposal as "a piece of garbage."

The U.S. dollar index, a measure of its value against a basket of major foreign currencies, was up 0.36% at 98.30. It was at 97.85 on February 27 and hit 100.64 in late March. It fell below its pre-war levels late last week.

“It appears unlikely that a breakthrough would be achieved before the Trump-Xi summit later this week,” said Mohit Kumar, an economist at Jefferies.

Trump is ‌expected to arrive in Beijing on Wednesday, where ⁠Iran is set to be among the topics discussed with Chinese President Xi Jinping.

CRUDE OIL PRICE SUPPORTING DOLLAR

“As long as crude oil prices stay high, because of the U.S.' blockade [of Iranian ports] and Iran's threat to ⁠tanker traffic in the Gulf, the dollar will stay strong,” said Thierry Wizman, global forex and rates strategist at Macquarie Group.

“The toll that high oil prices will take on the rest of the world's economies will be much more pernicious than the toll [on] the U.S.,” he added.

Oil prices rose 3% on ​Tuesday ​as hopes for a deal to end the war on Iran faded. [O/R]

Wizman also argued ​that the U.S. administration has probably decided that its ‌economic blockade of Iran -- the 'economic war' -- could be more effective than resuming bombing runs.

RATE OUTLOOK IN FOCUS

Investors are also closely watching the monetary outlook, with the Federal Reserve now expected to keep rates higher for longer, while traders are betting that the European Central Bank will hike its depo rate to about 2.75% by year-end from the current 2%.

The euro fell 0.33% to $1.1744.

Eyes will be on a U.S. inflation report due later in the session, which is forecast to show that consumer prices rose 0.6% last month after jumping 0.9% in March, according ‌to a Reuters survey of economists. Estimates ranged from a 0.4% gain to ​a 0.9% rise.

"Given the likelihood of elevated inflation readings, the CPI on Tuesday and ​PPI on Wednesday, the case for eventual rate cuts this ​year looks increasingly difficult to sustain," said John Velis, head of Americas strategy at BNY.