Dollar Dominates Amidst Middle East Tension and Fed's Inflation Warning

The dollar gained strength on Thursday as investors sought safe-haven assets amid escalating tensions in the Middle East. Concerns emerged over possible U.S. involvement, overshadowing Federal Reserve Chair Jerome Powell's cautious stance on inflation.

Asian markets saw muted activity initially, but the dollar climbed, impacting risk-sensitive currencies. Reports suggested the U.S. might strike Iran, adding to the geopolitical strains along with ongoing conflict between Iran and Israel, now in its seventh day. The U.S. markets, closed for the Juneteenth holiday, experienced reduced liquidity.

In economic news, the Fed held rates steady, projecting future cuts despite not reaching consensus. Powell indicated tariffs would lead to higher goods prices by summer. Markets remain jittery about rate cut timing, as analysts predict potential cuts later this year, amid ongoing uncertainties.

(With inputs from agencies.)