The US dollar posted its biggest daily gain in a month on Friday, as investors returned to safe haven assets including gold, following Israel's attack on Iran that triggered a military response from Tehran.
Officials from the United States and Iran are scheduled to meet in a sixth round of talks in Oman on Sunday to discuss Tehran's uranium enrichment program.
The Swiss franc and Japanese yen initially strengthened, but then retreated as investors turned back to the US dollar, a currency that has long been a safe haven during geopolitical and financial crises. US President Donald Trump urged Iran to reach a deal, while warning .
The US dollar index jumped almost 0.9%, driven by falls in the euro, British pound and Australian dollar. This was the biggest daily gain since May 12. According to analyst Fiona Cincotta of City Index, the US dollar's surge is a direct reaction to geopolitical tensions, but may be temporary ahead of the Federal Reserve's interest rate meeting next week.
The euro ended a four-day rally, down 0.7% at $1.1494, but still close to a four-year high hit on Thursday. The U.S. dollar rose 0.6% against the yen to 144.43 and rose 0.52% against the Swiss franc to 0.8147. Investors also bought U.S. Treasury bonds, sending the 10-year yield to a more than one-month low of 4.31%. Gold prices jumped 1.7% to $3,444 an ounce, the highest since early May.
However, despite Friday’s gains, the U.S. dollar index is still near its lowest since March 2022 and is set to post its biggest weekly decline of nearly 1% in more than three weeks. OCBC currency analyst Christopher Wong said geopolitical tensions could disrupt the dollar’s downward trend in the near term, especially heading into the weekend. Two inflation reports this week showed price pressures remained contained, raising expectations that the Fed may cut interest rates more aggressively. However, new tariffs could add to price pressures in the months ahead.
