Dollar reigns

The dollar strengthened on Thursday after briefly retreating from three-month highs, as the fallout from war ​in the Middle East roiled global markets and kept sentiment fragile, bolstering demand for the safe-haven currency.

Earlier in the session, a towering ‌rally in the dollar was halted as investors clung on to tenuous assumptions that the conflict might not last as long as initially expected and for a resumption of oil shipments through the Strait of Hormuz.

But markets remained at the mercy of the US-Israel war with Iran, now in its sixth day, after Iran launched a wave of missiles at Israel, sending millions of residents into ​bomb shelters.

That kept the greenback in favour as it quickly reversed early losses to trade higher, leaving the euro down 0.2 percent at $1.1608 and ​sterling falling 0.27 percent to $1.3335.

Against a basket of currencies, the dollar was up 0.2 percent at 99.00, resuming its climb toward an over ⁠three-month high hit earlier this week .

“There appears to be little to no escape. Traditional safe havens, like gold, are not playing their usual part,” said Bas ​van Geffen, senior macro strategist at Rabobank.

“Considering the sharp appreciation of the DXY index, dollar liquidity appears to be king.”

The dollar has risen nearly 1.4 percent for the ​week thus far, emerging as one of a handful of winners in a volatile few sessions that have dragged stocks, bonds and, at times, even safe-haven precious metals lower.

The spike in energy prices from the Middle East war has stoked fears of a resurgence in inflation that could derail the rate outlooks for major central banks.

Traders are now pricing in just a 34 percent ​chance of a Federal Reserve rate cut in June, as compared with a near 46 percent chance a week ago, according to the CME FedWatch tool, though ​that has in part been driven by upbeat US economic data on Wednesday.

Rate easing expectations from the Bank of England have also been pared back , while money markets increased bets on ‌European Central ⁠Bank rate hikes as early as this year .