The dollar continued its five-day winning streak on Friday, on track for its largest weekly percentage rise in two months, as markets increasingly price in potential Federal Reserve rate hikes due to mounting inflation pressures.
The greenback's advance coincides with a spike in U.S. Treasury yields, with the benchmark 10-year note reaching 4.581%, its highest in a year. This follows a series of economic data pointing to rising price pressures, exacerbated by the Iran war closing the Strait of Hormuz.
The dollar index rose 0.29% to 99.23, while the euro fell 0.35% to $1.1627, hitting a five-week low.
"The bond market's leading the charge," said Joseph Trevisani, senior analyst at FXStreet. "They're starting to get worried about inflation."
West Texas Intermediate crude jumped 3.07% to $104.28 a barrel, and Brent climbed 2.72% to $108.60, after comments from President Donald Trump and Iran's foreign minister dimmed hopes for a deal to end attacks around the Strait of Hormuz.
Several Fed officials this week signaled that controlling inflation is a top priority. New York Fed President John Williams said Thursday he saw no need to change policy now, but others did not rule out rate hikes if price pressures persist.
Markets now see a 48.4% chance of a 25-basis-point rate hike by December, up from 14.3% a week ago, according to CME FedWatch.
The 10-year Treasury yield rose 12 basis points to 4.579%, while the 30-year bond yield hit 5.1178%, its highest since May 22.
Against the yen, the dollar strengthened 0.19% to 158.65, pushing the yen back toward the 160 mark that recently prompted Japanese intervention.
Sterling fell 0.37% to $1.3348, hitting a five-week low amid political turmoil around Prime Minister Keir Starmer.