Key facts
- The U.S. dollar stabilized above a one-month low on Friday.
- Softer U.S. inflation data has led traders to cut bets on imminent Federal Reserve rate hikes.
- Escalating tensions in the Middle East between Iran and the U.S. have soured sentiment and spurred safe-haven demand for the dollar.
- Oil prices are near one-month highs due to geopolitical risks.
- The dollar index is poised for a weekly decline but has found support from safe-haven flows.
The U.S. dollar stabilized on Friday, holding above a one-month low, though it was set for a weekly decline. This came as a softer-than-expected U.S. inflation report this week led traders to reduce their bets on imminent interest rate hikes from the Federal Reserve. However, escalating attacks in the Middle East between Iran and the United States soured sentiment and spurred safe-haven bids for the dollar, pushing oil prices near one-month highs.
In currency markets, the euro was trading at $1.1445, poised for a weekly rise, while sterling fetched $1.3476, on course for its third consecutive weekly gain. The Japanese yen remained near a 40-year low against the dollar. The dollar index, measuring the U.S. currency against six other major currencies, was at 100.72, set for a weekly drop of 0.24%.
Data released on Thursday showed U.S. retail sales rose slightly in June, and other economic indicators pointed to labor market stability. Economists believe the Federal Reserve will keep interest rates unchanged this month. However, Federal Reserve Vice Chair Philip Jefferson suggested he would be open to raising rates if there is no near-term improvement in inflation.