The U.S. dollar climbed to a three-week high against the Japanese yen on Friday and also gained on the Swiss franc, as signs emerged of easing tensions in the Middle East.
Iran expressed openness to further talks with European nations amid its ongoing conflict with Israel, calming market fears of immediate escalation.
Iranian Foreign Minister Abbas Araqchi said Tehran was willing to continue discussions with Germany, France, the UK, and the EU following a round of talks in Geneva. This comes despite Iran’s refusal to negotiate its nuclear program while under Israeli attack.
The recent conflict has involved a week-long exchange of airstrikes between Israel and Iran, heightening global market volatility and boosting the demand for the U.S. dollar. Speculation about potential U.S. involvement added to investor anxiety earlier in the week, though a White House statement saying President Trump would decide on the matter within two weeks helped calm nerves.
Market Reactions and Central Bank Moves
The U.S. Dollar Index is on track for a 0.6% weekly gain, though it remained flat on Friday after a Federal Reserve governor suggested rate cuts could begin as early as July due to softer inflation data.
Brent crude fell over 2%, easing inflation concerns slightly. Lower oil prices supported oil-importing currencies like the euro and yen.
Euro rose 0.3% to $1.1534
Yen slipped 0.29% to 145.88 per dollar
Fed Chair Jerome Powell maintained the forecast of two rate cuts this year but warned inflation risks remain “meaningful.” Analysts interpreted the Fed’s stance as a “hawkish tilt,” which helped buoy the dollar this week.
Swiss franc remained steady at 0.8166 per dollar but was poised for its biggest weekly drop since April after the Swiss National Bank unexpectedly cut interest rates to 0%.
Norwegian krone also weakened significantly after a surprise 25 basis-point rate cut by Norges Bank, falling over 2% against the dollar this week.
Global Currency Landscape
Australian and New Zealand dollars, often tied to risk sentiment, both declined 0.3% versus the U.S. dollar.
Chinese yuan held steady at 7.1820 following China’s decision to keep its benchmark lending rates unchanged.
British pound was flat at $1.3471, after retail sales data showed the steepest monthly decline since December 2023.
Despite recent gains, the U.S. dollar remains under pressure from broader concerns including ongoing trade tensions, potential tariffs, and their impact on global economic growth.
“The market might just be adjusting positions now,” said Marc Chandler, chief market strategist at Bannockburn Global Forex, as traders weigh geopolitics, central bank signals, and macroeconomic data.
Photo by Milad Mosapoor, Wikimedia commons.