Dollar Surges Amid Middle East Turmoil

The dollar surged on Friday, marking its strongest monthly gain in nearly a year, as escalating tensions in the Middle East drove investors toward safe-haven assets. Heightened uncertainty followed another tumultuous week, further intensified by President Trump's extended deadline concerning Iran's energy facilities.

As U.S. and Tehran provided conflicting reports on diplomatic progress, investor sentiment soured amid reports of Pentagon's potential deployment of 10,000 additional troops to the region. Safe-haven demand buoyed the dollar, driven by rising expectations of a U.S. rate hike this year. Consequently, the dollar index traded around 100, gaining 2.4% in March and heading for its best month since July 2025.

The yen approached a critical level, hinting at possible intervention by Japanese authorities as it weakened towards 160 per dollar. Meanwhile, Japan's inflationary pressures due to imported energy dependency and rate considerations from its central bank kept the yen under pressure. Similar dynamics affected other currencies like the euro and sterling, while the Australian dollar faced two-month lows.