Dollar firm amid renewed Middle East hostilities

The dollar index measured against key peers was a bit higher at 98.235

The dollar started Friday’s Asian session on a firm ​footing against most major currencies after renewed hostilities broke out ​between Iran and the U.S., while the ‌yen ​held largely steady following new comments from Tokyo.

Iran and the U.S. exchanged fire and traded barbs again on Thursday, piling renewed pressure on a fragile month-long ceasefire as Iran reviews Washington’s ‌proposal to end the war. Oil prices climbed, with U.S. crude futures adding 3% in early trading, adding to the risk-off mood in currency markets.

The dollar index measured against key peers was a bit higher at 98.235. The rising tensions lifted the U.S. currency for a second ‌day from an over two-month low struck early in the week on hopes of a peace deal, putting it on track ‌to finish the week largely flat.

The path towards a lasting agreement is anything but linear, wrote Chris Weston, head of research at Pepperstone.

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. Markets are also ⁠bracing for ​the U.S. non-farm payrolls report later ⁠on Friday, and it may take an outlier number, particularly a sufficiently weak one, to really move the dial on dollar volatility, he added.

Sterling traded at $1.3555, headed ⁠for its first weekly loss since March, as investors awaited local election results. The euro was steady ​at $1.1727, poised to close the week a bit firmer.

The Australian dollar fetched $0.72059, and the New Zealand kiwi changed hands at $0.59365, both ⁠on track to post a winning week on improved risk appetite in earlier days. Traders remained focussed on the yen after recent interventions and verbal warnings from Tokyo kept ⁠sharp ​selling at bay. The yen was largely steady at 156.995 in early Asian deals and is set to close the week on a steady footing.