Dollar firms as Middle East tensions send oil higher

By Kevin Buckland and Lucy Raitano

TOKYO/LONDON, May 21 (Reuters) - The U.S. dollar firmed connected Thursday aft Reuters reported that Iran's ultimate person has issued a directive that the country's near-weapons-grade uranium should not beryllium sent abroad, perchance complicating talks connected ending the U.S.-Israeli warfare connected Iran.

The dollar tends to emergence erstwhile tensions flare ‌in the Middle East, arsenic higher lipid prices measurement connected oil-dependent economies specified arsenic Japan and the euro area, portion safe-haven request for the greenback increases.

The dollar ‌rose 0.2% against the yen to 159.110 yen aft falling for the archetypal clip successful 8 sessions against the yen connected Wednesday.

U.S. President Donald Trump connected Wednesday had said negotiations with Tehran were successful the last stages, portion besides ​warning of further attacks if Iran does not hold to a deal.

The dollar scale has been mostly dependable truthful acold successful May, rising conscionable 0.1%, with broader currency markets comparatively calm during the vigor terms daze successful caller weeks.

"The marketplace is already hoping determination is going to beryllium a speedy woody to bring an extremity to the conflict," Lee Hardman, elder currency economist astatine MUFG, said, adding specified a script would beryllium dollar antagonistic initially.

However, determination could beryllium much economical fallout from vigor prices, helium said, adding: "There's inactive a important hazard that things volition get worse earlier they gets ‌better."

Elsewhere, Bank of Japan argumentation committee subordinate Junko Koeda added a ⁠measure of enactment for the yen with hawkish comments connected Thursday, saying successful a code that the cardinal slope needs to proceed to rise rates with underlying ostentation already astir a 2% target.

The euro was 0.26% down astatine $1.15935, aft dipping connected Wednesday to its weakest level since April ⁠7 astatine $1.1583 earlier bouncing back.

Economic enactment successful the euro portion shrank astatine its sharpest complaint successful much than two-and-a-half years successful May arsenic a war-driven surge successful surviving costs hammered request for services crossed Europe and firms accelerated layoffs, surveys showed connected Thursday.

"All told, determination is thing present to enactment the European Central Bank Governing Council disconnected its plans to rise rates by 25 bp successful June, nor thing ​to ​ease concerns astir the risks of a recession," Andrew Kenningham, main Europe economist astatine Capital Economics, said, referring ​to euro country PMI data.

Traders were inactive afloat pricing successful 2 ECB ‌rate hikes and assigning much than a 50% probability to a 3rd tightening determination by year-end.

Sterling was down 0.4% against the dollar astatine $1.34334 aft immoderate worse-than-expected PMIs.