The US dollar held steady against major currencies on Friday as renewed hostilities between the US and Iran pushed investors towards safer assets, while oil prices climbed sharply amid fears over regional stability and shipping flows through the Strait of Hormuz.
US crude futures jumped as much as 3% in early trading after Washington and Tehran exchanged fresh attacks and rhetoric, raising concerns over the fragile ceasefire that had held for the past month. The escalation reversed some of the optimism seen earlier this week when markets had hoped for progress towards a peace agreement.
The dollar index stood at 98.195, remaining firm after rebounding from a more than two month low reached earlier in the week. Analysts said traders were reassessing expectations surrounding the conflict and the potential impact on global energy flows.
Chris Weston, head of research at Pepperstone, said: “The path towards a lasting agreement is anything but linear.”
“Traders have had to rethink the assumptions on the trajectory of the conflict and the normalization of vessel flows through Hormuz that had been made over the last couple of sessions,” he added.
Investors are also watching closely for the upcoming US non-farm payrolls report, which could influence expectations surrounding Federal Reserve policy and broader dollar movements.
In currency markets, sterling traded at US$1.3565 and was on track for its first weekly decline since March amid political uncertainty in the United Kingdom ahead of local election results. The euro remained relatively unchanged at US$1.1734.
Meanwhile, the Japanese yen stabilised at 156.855 against the dollar after repeated warnings from Tokyo over excessive currency weakness. Japan’s top currency diplomat reiterated that authorities remain prepared to intervene in markets if necessary.
Tony Sycamore, market analyst at IG, said intervention could only slow the yen’s decline unless broader macroeconomic conditions improve.
