Dollar Gains Amid Middle East Tensions; Market Awaits U.S. Payrolls Data

The dollar saw its sharpest weekly gain after an Iranian missile attack on Israel drove demand for safe-haven assets. This move affected global currencies, with notable falls for the euro and the New Zealand dollar. Markets remain focused on oil prices and upcoming U.S. private payrolls data.

The dollar saw its sharpest weekly gain on Wednesday following an Iranian missile strike on Israel, prompting a surge in demand for safe-haven assets amid fears of further Middle East conflict. The euro remained below $1.10 after experiencing its largest drop in nearly four months.

Safe-haven buying kept the yen steady at 143.45 per dollar and the Swiss franc at 0.8463 per dollar. The New Zealand dollar dropped 1.1% overnight to $0.6283, while oil prices surged 2.5%. The U.S. dollar index climbed about 0.5% overnight to 101.2, marking its biggest rise since September 25, fueled by stronger-than-expected U.S. job openings data.

Israel stated that Iran had fired over 180 ballistic missiles. Iran's Revolutionary Guard Corps claimed the attack was retaliation for Israeli actions in Lebanon against Hezbollah. No injuries were reported in Israel, but the incident has heightened the risk of further conflict as Israel considers escalating its response.

Market reactions have focused primarily on oil prices, with analysts predicting future moves will depend on Israel's next steps and potential strikes on Iran's military or oil sectors. The Australian dollar dipped to $0.6883, partially offset by positive retail sales data. Sterling fell 0.7% overnight, holding steady at $1.3278 in early Asia trading.

Westpac strategist Imre Speizer noted Middle Eastern unpredictability, suggesting market sentiment could recover if escalation is avoided. In New Zealand, a business survey indicating cooling price pressures raised expectations for a 50 basis point interest rate cut by the central bank next week.

Later in the day, Democrat Tim Walz and Republican JD Vance will face off in a vice presidential debate, while U.S. private payrolls data is also anticipated. Meanwhile, a large-scale strike by East and Gulf Coast dockworkers, the first in nearly 50 years, has halted around half of U.S. ocean shipping.

(With inputs from agencies.)