Key Takeaways

• Dollar steady: The DXY held mostly unchanged at 99.30, remaining near a six-week high.
• Euro slips: EUR/USD fell 0.2% to $1.1599, while the British pound dropped 0.1% to $1.3424.
• UK retail sales drag: The pound was weighed down by UK retail sales declining by the most in almost a year in April as shoppers battled elevated prices.
• Dollar well above pre-war levels: Safe-haven appeal and U.S. energy exporter status continue to underpin the greenback.
• Inflation fears drive rate hike bets: Central banks worldwide may need to lift rates in response to the Iran-driven energy shock.
• Yen under pressure: A firming dollar and elevated oil have weighed heavily on Japan’s currency, with reports suggesting authorities intervened recently.
• Indonesia acts: Officials ordered all natural resource exporters to store export revenues in state banks from June 1 to support the struggling rupiah.
• ING’s read: “The FX market is relatively calm and being gently bounced around by headlines out of Iran.”
• Pakistan diplomacy active: Iran’s FM met Pakistan’s interior minister to bridge gaps in peace proposals Friday.
• Gaps narrowing: A senior Iranian official told Reuters differences in talks have shrunk.
• Rubio’s cautious optimism: “Good signs” but waiting to “see what happens over the next few days.”
• Uranium report disputed: The White House called the Reuters uranium directive report false.
• Hormuz toll rejected: Trump opposes Iran and Oman’s plan to establish Hormuz transit fees.
• Strait still shuttered: The conduit handling a fifth of global oil remains effectively closed.

The U.S. dollar held steady near a six-week high on Friday, as traders assessed a series of reports on peace talks to end the more than two-month-old war in Iran.

By 06:21 ET (10:21 GMT), the U.S. dollar index — which tracks the greenback against a basket of currency peers — was mostly unchanged at 99.30. The euro dipped 0.2% versus the dollar to $1.1599, while the British pound fell 0.1% to $1.3424 — dragged down by data showing UK retail sales declined by the most in almost a year in April as shoppers battled elevated prices.

The dollar remains well above pre-war levels, buoyed in part by the belief that the currency has been a relative safe haven during the crisis. Further burnishing its appeal has been the view among some analysts that the U.S. economy — as a major energy exporter — may be insulated from an oil price spike brought on by the conflict.

Worries have abounded that an Iran-related energy shock could spark a wave of inflation around the world that may lead many central banks to lift interest rates in response.

Yen and Emerging Markets Feel the Squeeze

A firming dollar and elevated oil prices have weighed on the yen in particular, with media reports suggesting that Japanese authorities likely recently intervened to support the currency.

Other currencies in emerging markets are also under pressure, including in Indonesia, where officials announced that all exporters of natural resources must store all of their export revenues in state-owned banks from June 1 — a move to help prop up the struggling rupiah.

FX Market “Gently Bounced Around by Iran Headlines”

Much of the attention now centers around diplomatic efforts to forge a peace deal, though messaging from both Washington and Tehran has been mixed.

“The [foreign exchange] market is relatively calm and being gently bounced around by headlines out of Iran,” analysts at ING said in a research note.

Iran’s foreign minister met with the interior minister of Pakistan on Friday, with discussions focused on bridging key divides between the U.S. and Tehran over peace proposals, Iranian media reported.

The gathering comes two days after Pakistan presented Iran with the latest U.S. message in the negotiations, Reuters reported, citing the semi-official Tasnim and ISNA news agencies. Islamabad has frequently acted as a mediator between Washington and Tehran.

According to ISNA, Pakistan’s Interior Minister Syed Mohsin Naqvi is attempting to forge a framework for ending the war and resolving differences between both sides.

U.S. Secretary of State Marco Rubio said discussions have shown “good signs” of progress, although he flagged that he did not want to be “overly optimistic” and was waiting to “see what happens over the next few days.”

Meanwhile, a senior Iranian official quoted by Reuters said that gaps in negotiations have narrowed. However, a major fault line emerged on Thursday when the news agency reported that Iran’s Supreme Leader Mojtaba Khamenei had issued a directive that no enriched uranium should leave the country — hardening Tehran’s stance against one of President Donald Trump’s major demands.

The White House pushed back against the report, describing it as false, Fox News reported, citing a person directly involved in the negotiations.

Washington and Iran are now locked in a protracted ceasefire that has lasted longer than the initial phase of bombardments which began in late February. The U.S. and Israel launched a joint assault on Iran, sparking a wave of attacks that spread to other areas of the Middle East, including major energy-producing Gulf nations.

Questions are also swirling around the status of the Strait of Hormuz, with Trump opposing efforts by Iran and Oman to establish a toll system for traversing the narrow conduit through which roughly a fifth of the world’s oil transits. Crucially, the strait remains all but closed to tanker traffic — keeping upward pressure on oil prices and fueling worries over a wave of inflation worldwide.