The US dollar held steady on Friday and is heading toward its largest weekly gain in the past twelve months, as escalating conflict in the Middle East boosted demand for safe-haven assets.

The euro and the Japanese yen remained under pressure as the crisis pushed oil prices higher, increasing inflation risks for economies dependent on energy imports and shifting expectations for the monetary policy of the US Federal Reserve and other central banks.

Initial hopes for de-escalation in the conflict with Iran have given way to renewed uncertainty over the duration of the crisis.

According to MUFG currency analyst Lee Hardman, the dollar is expected to strengthen further in the short term. As he noted, the key factor will be the scale of the shock in energy prices. If oil prices continue to rise and remain elevated for longer, this will support a stronger dollar.

The dollar index, which measures the performance of the US currency against a basket of major currencies, stood at 99.14, on track for a weekly rise of 1.5 percent, the largest since November 2024.

The euro fell 0.16 percent to $1.159 and is heading toward a weekly decline of 1.9 percent, the biggest since September 2022. The yen weakened 0.1 percent to 157.77 per dollar, while the British pound stood at $1.3347.

The rise in energy prices, driven by the conflict with Iran, has intensified fears of renewed inflation, prompting a reassessment of interest rate expectations among major central banks. Investors are pushing back the timing of the next potential rate cut from the Federal Reserve, while expectations for monetary easing from the Bank of England are also declining. At the same time, bets are increasing on potential interest rate hikes by the European Central Bank.

Markets are also awaiting US employment data for February. According to a Reuters poll of economists, nonfarm payrolls are estimated to have increased by 59,000 last month, compared with an increase of 130,000 in January, while the unemployment rate is expected to remain at 4.3 percent.

In the cryptocurrency market, Bitcoin fell 0.96 percent to $70,459.79 and Ether dropped 1.21 percent to $2,055.42.

Source: CNA