The dollar erased early gains amid escalating Gulf hostilities, while the yen declined after reports Japan won’t adjust pension fund allocations soon.
The dollar index reversed early gains to trade 0.2% lower at 100.83, pressured by renewed Iran-U.S. clashes in the Gulf. The euro rose 0.15% to $1.1433, while sterling held steady at $1.339 and the Australian dollar dipped 0.1% to $0.694.
Oil prices surged 3% to $78.50 a barrel after Iran targeted U.S. facilities and temporarily closed the Strait of Hormuz. Earlier dollar strength faded as investors reassessed geopolitical risks amid a stronger Fed outlook, contrasting with past conflict-driven rallies.
The yen slid following reports Japan’s government pension fund won’t immediately alter its asset mix, easing concerns over potential shifts in global bond demand. Markets remain cautious as tensions persist, though Fed rate expectations limit dollar upside.