Dollar steadies, yen touches two-week high

The US Dollar (USD) headed for its first weekly loss in a month on Friday, but pulled away from two-week lows, ahead of a key US jobs report later in the day, while tensions in the Middle East kept investors on edge.

Demand for safe-haven currencies, along with more warnings from Japanese authorities, helped send the yen to two-week highs against the dollar.

Investors are wary of developments in the Middle East after U.S. President Joe Biden threatened on Thursday to condition support for Israel’s offensive in Gaza on it taking concrete steps to protect aid workers and civilians.

The dollar has had a turbulent week, falling from a five-month high to a two-week low after an unexpected slowdown in U.S. services growth supported expectations of bringing interest rates down.

It then rebounded after comments on Thursday from Minneapolis Federal Reserve President Neel Kashkari, who is not a voter on this year’s policy-setting committee, that rate cuts might not be required this year if inflation continues to stall.

Investors have reeled in their expectations of how much the Fed might cut rates this year, with three quarter-point cuts being the most likely scenario right now.

But ongoing strength in the economy, along with a sweep higher in commodity prices, from oil, to copper and to coffee and cocoa, is complicating the inflation picture.

The dollar index , which measures the performance of the greenback against a basket of major currencies, was last up 0.1% at 104.27.

Wall Street closed sharply lower Thursday as Federal Reserve officials indicated an interest rate cut may not occur so soon.