The US dollar index eased to 99.903

The US dollar wobbled on Thursday as new strikes in West Asia undermined sentiment, while a surge in May US consumer inflation to a three-year high kept investors uneasy about the central bank’s monetary policy outlook.

The currency markets have been subdued this week, as investors weighed the fragile ceasefire in West Asia against a renewed cycle of tit-for-tat strikes between Iran and US, eroding hopes for a near-term peace agreement.

The dollar index eased to 99.903 after US attacked Iran.

The euro bought $1.1553, inching away from the 10-week low it hit last week, but has given up most of its gains since a ceasefire was struck in early April. The spotlight will be on the European Central Bank policy meeting later in the day as it looks poised to raise rates to tackle inflation.

The latest escalation kept markets jittery, pushing oil prices higher. Brent futures advanced over 2 per cent to $95.40 a barrel.

Still, the market reaction was less volatile than in the past, with the dollar remaining relatively subdued in early Asian trading.

We still have a bit of news fatigue in the market, this kind of escalation a few weeks ago would probably have had Brent back up through $100 a barrel and the dollar surging, said Nick Twidale, chief market analyst at ATFX Global.

It comes down to the markets craving a bit of certainty again, said Twidale. Is this conflict and closure of the Strait going to be the new status quo or another ‘negotiating tactic’ that brings peace hopes back to the table.