The dollar was on track for its first weekly gain in three weeks on Friday in broadly muted trading, as stalled peace negotiations between the US and Iran dampened hopes for an immediate easing of Middle East tensions.
While Lebanon and Israel extended their ceasefire for three weeks ahead of its expiration on Sunday, Iran showed off its control over the Strait of Hormuz by releasing footage of its commandos storming a huge cargo ship, leaving the timing of the reopening of the world's most important shipping corridor uncertain and keeping oil prices elevated.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, slipped 0.1% to 98.75 but remained on track for a weekly gain of 0.5%. The euro was 0.1% higher at $1.169, Reuters reported.
Sterling edged 0.1% higher, with stronger-than-expected UK retail sales for March barely moving the needle.
"If you look at the last week the major theme is just that there's no real progression with peace talks. For markets, it's difficult when there's no deadline," said Tommy Von Brömsen, FX strategist at Handelsbanken in Stockholm.
Brent crude futures rose 1.5% to $106.60 a barrel.
The dollar has drawn safe-haven demand amid the uncertainty. It gained ground in March as concerns over the conflict deepened, but gave back some of those gains this month as optimism over a potential resolution grew.
"Oil and the dollar are still moving pretty closely together, and with crude creeping back up ... I'd say the dollar is still staying fairly firm," said Sho Suzuki, a market analyst at Matsui Securities.
Meanwhile, the yen was steady after four days of losses, rising 0.1% to 159.7 per dollar.
CENBANK BONANZA LOOMS
Traders are looking ahead to a central-bank-heavy week next week, with the Bank of Japan, European Central Bank, Bank of England and Federal Reserve among those due to deliver policy decisions.
"The main message from the central banks is that they are - so far at least - in a kind of 'wait-and-see' approach," said Handelsbanken's Von Bromsen.
He said the focus will be on communication and guidance, as market watchers assess how policymakers are digesting not just higher energy prices but the second-round effects of potentially higher inflation.
The European Central Bank will hold its deposit rate on April 30 but hike it in June, according to just over half of economists polled by Reuters, in a bid to protect a war-induced energy shock from knocking the euro zone economy off balance.
Meanwhile in Japan core consumer inflation slowed below the central bank's 2% target for a second straight month in March. Analysts, though, expect inflation to accelerate back above the Bank of Japan's target in coming months, as companies begin to pass on higher fuel costs from the Middle East conflict.
The BOJ is set to hold its two-day policy meeting ending on Tuesday. Reuters reported the bank is likely to hold off raising interest rates next week as fading prospects of a near-term end to the Middle East war keep the country's economic and price outlook highly uncertain. The BOJ is still expected to signal its readiness to hike to counter mounting price pressures.
Japanese Finance Minister Satsuki Katayama reiterated her verbal warning on intervention on Friday that authorities can take "decisive" action against speculative moves in the foreign exchange market, a day after saying Japan has a "free hand" to intervene and that past interventions had been effective.
The Australian dollar rose 0.1% versus the greenback to $0.7135. New Zealand's kiwi rose 0.1% to $0.5859.
In cryptocurrencies, bitcoin was little changed at $77,895.85.
