The dollar weakens against the euro and pound on Friday but is set for its largest weekly gain in more than a month as concerns about a widening Middle East conflict boost demand for safe-haven assets.
The dollar index, which tracks the U.S. currency against six peers, including the yen, euro, and Swiss franc, is on course to rise 0.6% this week. The gain comes amid heightened geopolitical risk following a week of air attacks between Israel and Iran.
The Israeli government says it is targeting Iran’s nuclear sites.
Iran says it will not discuss its nuclear program under attack, while European powers urge a return to negotiations. The White House says President Donald Trump will decide in the next two weeks on whether the U.S. will take part in the conflict.
The announcement eases some market concerns about immediate U.S. military action, though investors remain cautious.
The euro climbs 0.15% to $1.1517, supported by a drop in oil prices, which eases pressure on oil-importing countries. Brent crude falls more than 2% to $77 a barrel, near its January high. The yen slips 0.23% to 145.8 per dollar.
The Swiss franc trades 0.15% lower at 0.8177 per dollar, heading for its biggest weekly decline since mid-April after the Swiss National Bank cuts interest rates to zero. The Norwegian krone is down over 1% this week after Norges Bank makes an unexpected 25-basis-point rate cut.
Sterling rises 0.1% to $1.3483. Earlier gains are briefly trimmed after data shows British retail sales dropped at their fastest pace since December 2023.
China’s yuan trades at 7.1750 after the central bank leaves its benchmark lending rates unchanged.
Currencies tied to investor risk sentiment, such as the Australian and New Zealand dollars, hold steady.
Markets remain alert to global inflation risks. Oil price volatility and U.S. tariffs weigh on economic outlooks. The Federal Reserve maintains its projection of two rate cuts this year but signals ongoing inflation concerns.
