Dollar Dominance: Amid Middle East Tensions

The dollar reached multi-month highs as Middle East tensions, particularly between the U.S. and Iran, fueled investor demand for safe-haven assets. Prospects of increased U.S. troops and energy market disruptions heightened expectations of a Fed rate hike, impacting global currencies and bond yields.

The dollar hovered near multi-month peaks on Friday as investors sought safety amid escalating Middle East tensions. The markets remained unsettled after a tumultuous week, particularly as U.S. President Donald Trump extended the deadline to target Iran's energy facilities, while disparate accounts of diplomatic progress emerged.

The Wall Street Journal reported on Thursday that the Pentagon is considering sending up to 10,000 additional ground troops to the Middle East, casting doubt on a swift end to the conflict. This added to investor appetite for the dollar, which benefits from its safe-haven status and possible rate hikes driven by persistently high energy prices.

Meanwhile, the yen neared 160 per dollar, the euro faced minor losses, and the Australian and New Zealand dollars faced declines. Analysts predict prolonged disruptions could trigger global recession fears and broader monetary tightening cycles, impacting bonds and yields globally.

(With inputs from agencies.)