HONG KONG, (Reuters) - The dollar clung to its recent strength near a two-month high on Thursday as fresh Gulf hostilities sapped risk appetite, while the Japanese yen hovered near the key 160 level that kept traders on intervention alert.
Although Israel and Lebanon agreed to a ceasefire, a broader peace deal remained elusive, keeping oil prices elevated and supporting demand for the safe-haven dollar.
The euro was 0.1% stronger at $1.1609 . A Reuters poll showed that the European Central Bank is set to raise its deposit rate to 2.25% on June 11 to curb inflation. The British pound traded flat at $1.3427 .
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was a shade higher at 99.45, hovering near the strongest level since April 7 in the previous session.
"The USD's safe-haven status appears to be strengthening again" with oil prices and global yields rebounding on geopolitical tensions, said Sim Moh Siong, FX strategist at OCBC.
"There is no strong case for a bearish USD," he said, adding the bank stays neutral and expects a firm but rangebound greenback.
On the data front, a survey on Wednesday showed a measure of prices paid by U.S. services businesses jumped to the highest level in nearly four years last month, cementing economists' views that the Federal Reserve would hold interest rates unchanged well into next year.
The Japanese yen fetched 159.92 per dollar, off lows on Wednesday that pushed it past the critical 160-per-dollar mark for the first time since April 30, triggering verbal warnings from authorities. The 160 level is widely seen in markets as a line in the sand for potential official intervention.
Bank of Japan Governor Kazuo Ueda cemented a June rate hike in a clear narrative pivot toward inflation fighting, as the Iran war-driven energy shock sharpens price risks and opens the door to more frequent increases in borrowing costs.
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