HONG KONG: The dollar clung to its recent strength near a two-month high on Thursday as fresh Gulf hostilities pushed oil prices higher and dampened risk appetite, while the Japanese yen hovered near the key 160 level that has kept traders on alert for possible intervention.
Iranian attacks on Kuwait damaged its airport and injured dozens on Wednesday, while US military strikes near the Strait of Hormuz strained a fragile ceasefire and weakened hopes for a diplomatic resolution to the conflict.
The euro stood at US$1.1604, while the British pound traded at US$1.3424, both largely unchanged in Asian trading.
The risk-sensitive Australian dollar was steady at US$0.7132, while the New Zealand dollar rose 0.2 per cent to US$0.5872, rebounding from a one-week low.
The dollar index, which measures the US currency against a basket of currencies including the yen and the euro, was slightly higher at 99.47 after reaching its strongest level since April 7 in the previous session.
"The USD's safe-haven status appears to be strengthening again" as oil prices and global yields rebound on geopolitical tensions, said Sim Moh Siong, FX strategist at OCBC.
"There is no strong case for a bearish USD," he said, adding the bank remains neutral and expects a firm but rangebound US dollar.
On the data front, a survey on Wednesday showed that a measure of prices paid by US services businesses jumped to its highest level in nearly four years last month, reinforcing expectations that the Federal Reserve will hold interest rates unchanged well into next year.
The Japanese yen fetched 159.91 per US dollar, off Wednesday's lows that pushed it past the critical 160-per-dollar mark for the first time since April 30, triggering verbal warnings from authorities.
The 160 level is widely seen in markets as a line in the sand for potential official intervention.
Kazuo Ueda said the central bank must weigh the pros and cons of raising interest rates if inflation risks outweigh downside economic risks, comments that signal a high probability of a rate hike this month.
"He did as much groundwork as possible at this stage," despite stopping short of explicitly signalling a hike at the June meeting, wrote Naohiko Baba, head of Japan research and chief Japan economist at Barclays.
"The hawkish tone has strengthened further, including a clear expression of concern about behind-the-curve risk. We stick to our June rate hike call."
Bitcoin slid to a four-month low and was 2.8 per cent lower at US$63,119.5, while ether similarly hit a four-month trough and was at US$1,786.