The euro stood at US$1.1735 and the sterling traded at US$1.3532 , both down roughly 0.05% against the greenback in early Asia trades.
The US dollar index, which tracks the greenback against a basket of six major currencies, was steady at 98.335, near the strongest level in a week.
“I think it’s a less positive risk tone, effectively. The US dollar has been tracking risk sentiment very closely throughout the war,” said Ray Attrill, head of FX strategy at National Australia Bank.
A lack of positive momentum in the equity market is also a culprit, he added.
The US consumer price index (CPI) rose 3.8% in the 12 months through April, the biggest year-on-year increase since May 2023, as the oil shock triggered by the war with Iran pushed prices higher.
Meanwhile, hopes of a peace deal in the Middle East dwindled after US President Donald Trump said a ceasefire with Iran was “on life support” after Tehran rejected a US proposal to end the war and stuck to a list of demands that Trump called “garbage.”
Oil prices settled higher, with Brent crude futures LCOc1 last traded near US$108 a barrel.
The US two-year note yield, which typically moves in step with Federal Reserve interest rate expectations, rose to 3.9956%. The yield on benchmark US 10-year notes climbed to 4.4688%.
Markets have largely priced out any chance of a rate cut from the Fed this year, while expectations for a hike of at least 25 basis points at the central bank’s December meeting rose to 35%, according to CME’s FedWatch Tool.
The Australian dollar fetched US$0.72365, and the New Zealand dollar traded at US$0.5954, both largely flat.
The Japanese yen was largely steady at 157.715, after a sudden move stronger on Tuesday had stoked speculation of a “rate check” by authorities, which is often a precursor to currency intervention.
US Treasury Secretary Scott Bessent said the US and Japan believe that excess volatility in the currency market is undesirable, comments that were seen as offering some support to Tokyo’s recent round of intervention to prop up the yen.
Elsewhere, China’s yuan traded around 6.79 per dollar, near its strongest since February 2023, as markets looked ahead to this week’s meeting between Trump and Chinese President Xi Jinping in Beijing.