Dollar Steadies on Inflation Fears Amid Middle East Tensions

The dollar held firm near a one-week high on Wednesday amid increased risk sentiment triggered by rising U.S. inflation, which pushed Treasury yields higher. Concurrently, oil prices inched upwards due to renewed uncertainties in the Middle East.

The euro was at $1.1735 and the sterling at $1.3532, both dipping around 0.05% against the dollar during early Asia trades. The U.S. dollar index remained steady at 98.335, its strongest point in a week, mainly due to a less favorable risk tone and the lack of positive momentum in equity markets, according to Ray Attrill of National Australia Bank.

Oil prices settled higher with Brent crude futures trading near $108 per barrel, while the two-year U.S. Treasury note yield rose to 3.9956%. Market expectations now lean towards a potential rate hike by the Federal Reserve as opposed to a cut this year, amid declining hopes for a peace agreement in the Middle East.

(With inputs from agencies.)