The US dollar is on track to post its strongest monthly gains in nearly a year, supported by safe-haven demand as the war in the Middle East escalates and hopes for de-escalation fade.

Market movements have been driven by heightened tensions following another volatile week, especially after US President Donald Trump once again extended the deadline for targeting Iranian energy facilities, while Washington and Tehran offered conflicting accounts regarding diplomatic progress.

The US Department of Defense is also considering sending up to 10,000 additional troops to the region, according to The Wall Street Journal, further dampening investor optimism about a near-term end to the war.

Dollar benefits from safe-haven flows

Safe-haven inflows have supported the dollar, alongside rising expectations for US interest rate hikes this year. The dollar index traded near the 100 level, up about 2.4% since the start of March, on track for its best monthly performance since July 2025, when it gained 3.4%.

Yen under pressure and potential intervention test

The Japanese yen weakened toward the ¥160 per dollar level, a threshold traders view as a potential trigger for official intervention. The yen was last trading at ¥159.86 after touching ¥159.98 earlier.

Lee Hardman, a currency strategist at MUFG, said the market will test the authorities’ commitment, noting that officials have repeatedly signaled in recent weeks their readiness to take strong action, and that levels are now approaching a point that could prompt actual intervention.

The yen has also come under additional pressure from rising Japanese bond yields after the Bank of Japan released new estimates for the neutral interest rate, indicating policymakers’ willingness to raise rates to address inflation. Japan’s heavy reliance on energy imports also makes it more vulnerable to rising prices compared to other major economies.

Euro and sterling decline

The euro fell 0.1% to $1.152, while the British pound declined for the fourth consecutive session, down 0.2% to $1.331.

Carol Kong, a currency strategist at Commonwealth Bank of Australia, said the conflict does not appear likely to end soon, adding that the US dollar remains dominant as long as the conflict continues.

She added that if the conflict proves prolonged, oil prices are likely to continue rising, which would support the dollar at the expense of energy-importing currencies such as the yen and the euro.

Risk-sensitive currencies under pressure

The Australian dollar, which is sensitive to risk sentiment, fell to a two-month low before recovering to trade at $0.688, having lost about 2% since the start of the war, making it the second worst-performing currency after the Indian rupee, which declined around 3%.

Rising rate expectations and higher yields

Investors are now pricing in around a 70% probability of a quarter-point US rate hike this year, according to the CME FedWatch tool, marking a sharp shift from earlier expectations of more than 50 basis points in cuts before the outbreak of the war.

The Bank of England and the European Central Bank are also expected to tighten monetary policy, as part of a broader shift in interest rate expectations, which has pushed bond prices lower and yields to multi-year highs during the current month.

US Treasury yields rose slightly on Friday following a strong overnight jump, with the two-year yield at 3.9899%, while the benchmark 10-year yield increased by about one basis point to 4.4278%.

Gold prices rose in European trading on Friday as part of a recovery from four-month lows, supported by relatively active buying from lower levels. Despite this rebound, the precious metal is on track for a fourth consecutive weekly loss due to the strong performance of the US dollar against a basket of global currencies.

This comes amid weak prospects for a near-term end to the war in the Middle East, as uncertainty surrounds negotiations between the United States and Iran, a situation that is currently pushing global oil prices higher and renewing concerns about global inflation.

Price Overview

Gold prices today: gold rose more than 2.1% to $4,475.24, up from the session opening level of $4,377.42, after hitting a low of $4,368.34.

At Thursday’s settlement, gold lost nearly 3%, resuming losses that had paused over the past two days during a recovery from a four-month low of $4,098.23 per ounce.

Weekly performance

Over the course of this week’s trading, which officially ends with today’s settlement, gold prices are down about 1.0% so far and are heading toward a fourth consecutive weekly loss.

US dollar

The dollar index rose about 0.2% on Friday, extending gains for the fourth consecutive session, reflecting the continued strength of the US currency against a basket of major and minor currencies.

As is widely known, a stronger US dollar makes gold, which is priced in dollars, less attractive to buyers holding other currencies.

The rally comes as investors continue buying the dollar as a preferred safe-haven asset, with the Iran war approaching its fifth week and the difficulty of reaching a ceasefire agreement between the United States and Iran.

Global oil prices

Global oil prices rose by an average of 3% on Thursday, extending gains for the third consecutive day, amid renewed concerns over supply disruptions from the Middle East and the continued closure of the Strait of Hormuz.

Rising oil prices are likely to renew concerns about accelerating inflation across most parts of the world and increase pressure on policymakers at global central banks to raise interest rates.

Iran war developments

The Wall Street Journal reported on Thursday that the Pentagon is also considering sending up to 10,000 additional ground troops to the Middle East.

US President Donald Trump announced an extension of the delay in strikes on Iranian energy facilities for an additional 10 days, through April 6, noting that negotiations to end the war are progressing “very well.”

US Special Envoy Steve Witkoff confirmed that a 15-point peace proposal had been presented to Tehran via Pakistan, which is acting as a mediator alongside Egypt and Turkey.

The proposal includes a ceasefire and sanctions relief in exchange for Iran abandoning its nuclear program and reopening the Strait of Hormuz.

Iranian sources described the US proposal as “unfair and one-sided,” while state media expressed doubts about Washington’s seriousness, stressing that attacks will not stop without real guarantees.

US interest rates

According to the CME FedWatch tool, markets currently price a 95% probability that US interest rates will remain unchanged at the April meeting, while the probability of a 25-basis-point rate hike stands at 5%.

To reassess these expectations, investors are closely monitoring further economic data releases from the United States, in addition to tracking comments from Federal Reserve officials.

Gold outlook

Jim Wyckoff, senior analyst at Kitco Metals, said gold is under pressure from concerns about rising interest rates and inflation.

Wyckoff added that if the conflict continues, prices could fall below $4,000, while a ceasefire and renewed expectations of rate cuts could push prices back toward $5,000.

SPDR fund

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased by 0.29 metric tons on Thursday, bringing the total to 1,052.71 metric tons, rebounding from 1,052.42 metric tons, which was the lowest level since December 15.

The euro rose in European trading on Friday against a basket of global currencies, in an attempt to recover after three consecutive days of losses against the US dollar, benefiting from a slowdown in the US currency after Donald Trump announced a new delay in targeting Iranian energy facilities, which renewed hopes of reaching a ceasefire agreement in the Middle East.

Following more hawkish comments from the President of the European Central Bank this week, expectations for at least one interest rate hike this year have increased. To reassess those expectations, markets are awaiting further data on developments in the eurozone economy.

Price Overview

Euro exchange rate today: the euro rose 0.15% against the dollar to $1.1542, up from the session opening level of $1.1526, after hitting a low of $1.1524.

The euro ended Thursday’s session down 0.3% against the dollar, marking its third consecutive daily loss, after Iran denied entering negotiations with the United States to end the war in the Middle East.

US dollar

The dollar index fell 0.1% on Friday, heading toward its first loss in the past four sessions, reflecting a slowdown in the US currency against a basket of global currencies.

This comes as traders assess the likelihood of a halt in the war in the Middle East, amid intensified diplomatic efforts aimed at containing the escalation, with cautious anticipation of any signals that could pave the way for a de-escalation agreement or ceasefire.

Iran war developments

US President Donald Trump announced an extension of the delay in strikes on Iranian energy facilities for an additional 10 days, through April 6, noting that negotiations to end the war are progressing “very well.”

US Special Envoy Steve Witkoff confirmed that a 15-point peace proposal had been presented to Tehran via Pakistan, which is acting as a mediator alongside Egypt and Turkey.

The proposal includes a ceasefire and sanctions relief in exchange for Iran abandoning its nuclear program and reopening the Strait of Hormuz.

Iranian sources described the US proposal as “unfair and one-sided,” while state media expressed doubts about Washington’s seriousness, stressing that attacks will not stop without real guarantees.

The Wall Street Journal reported on Thursday that the Pentagon is also considering sending up to 10,000 additional ground troops to the Middle East.

Global oil prices

Global oil prices rose slightly on Friday, extending gains for the third consecutive day, as markets await further evidence of engagement between the United States and Iran in negotiations to de-escalate military tensions and reopen the Strait of Hormuz.

Carol Kong, a currency strategist at Commonwealth Bank of Australia, said the conflict does not appear likely to end soon, adding that the US dollar remains the strongest currency as long as the conflict continues.

Kong added that if expectations of a prolonged conflict prove correct, oil prices are likely to continue rising, which would further strengthen the dollar at the expense of net energy importers such as the Japanese yen and the euro.

European interest rates

ECB President Christine Lagarde said on Wednesday that the bank is ready to raise interest rates even if the expected rise in inflation is temporary.

Following those comments, money markets increased pricing for a 25-basis-point rate hike by the European Central Bank at the April meeting from 25% to 35%.

Sources told Reuters that the European Central Bank is likely to begin discussing interest rate hikes next month.

To reassess these expectations, investors are awaiting further economic data from the eurozone on inflation, unemployment, and wage levels.

The Japanese yen rose in Asian trading on Friday against a basket of major and minor currencies, in an attempt to recover from a one-week low against the US dollar, benefiting from a slowdown in the US currency after Donald Trump announced a new delay in targeting Iranian energy facilities, which renewed hopes of reaching a ceasefire agreement in the Middle East.

As inflationary pressures on policymakers at the Bank of Japan ease, expectations for a Japanese interest rate hike in April have declined. To reassess those expectations, investors are awaiting further data on developments in the world’s fourth-largest economy.

Price Overview

Japanese yen exchange rate today: the US dollar fell 0.2% against the yen to ¥159.46, down from the session opening level of ¥159.78, after reaching a high of ¥159.79.

The yen ended Thursday’s session down 0.2% against the dollar, marking its third consecutive daily loss, and hitting a one-week low of ¥159.85, due to fading hopes for a ceasefire in the Middle East.

US dollar

The dollar index fell 0.1% on Friday, heading toward its first loss in the past four sessions, reflecting a slowdown in the US currency against a basket of global currencies.

This comes as traders assess the likelihood of a halt in the war in the Middle East, amid intensified diplomatic efforts aimed at containing the escalation, with cautious anticipation of any signals that could pave the way for a de-escalation agreement or ceasefire.

Iran war developments

US President Donald Trump announced an extension of the delay in strikes on Iranian energy facilities for an additional 10 days, through April 6, noting that negotiations to end the war are progressing “very well.”

US Special Envoy Steve Witkoff confirmed that a 15-point peace proposal had been presented to Tehran via Pakistan, which is acting as a mediator alongside Egypt and Turkey.

The proposal includes a ceasefire and sanctions relief in exchange for Iran abandoning its nuclear program and reopening the Strait of Hormuz.

Iranian sources described the US proposal as “unfair and one-sided,” while state media expressed doubts about Washington’s seriousness, stressing that attacks will not stop without real guarantees.

The Wall Street Journal reported on Thursday that the Pentagon is also considering sending up to 10,000 additional ground troops to the Middle East.

Japanese interest rates

Data released this week showed a slowdown in core inflation in Japan during February, in the latest sign of easing inflationary pressures on policymakers at the Bank of Japan.

Following the data, markets reduced pricing for the probability of a quarter-point rate hike by the Bank of Japan at the April meeting from 30% to 15%.

To reassess these expectations, investors are awaiting further data on inflation, unemployment, and wages in Japan.