Dollar Hits Three-Month High as Iran War Sparks Toxic Mix of Higher Inflation and Slower Growth

Nearly two weeks since the U.S. and Israel launched air attacks on Iran, global currency markets are feeling the full force of the crisis. The dollar index climbed to its highest level since November 26, rising 0.16% to 99.83, on track for a 1% weekly gain. The euro dropped to $1.1501, its lowest since November 21, while the yen weakened to 159.69 per dollar, its worst level since July 2024. Sterling fell 0.08% to $1.333. Japan's Finance Minister Satsuki Katayama warned Friday that Tokyo stood ready to act against damaging yen moves, confirming close contact with U.S. authorities on foreign exchange. The U.S. issued a 30-day waiver allowing countries to buy sanctioned Russian petroleum products stranded at sea. Markets now await central bank meetings next week in the U.S., Europe, and Japan, with traders pushing ECB rate hike expectations to June and U.S. Federal Reserve cuts delayed to December.