Dollar Set for Weekly Gain as Iran Uncertainty and US Jobs Data Loom

The US dollar held steady on Friday but remained on track for a weekly gain against major peers, as uncertainty over a potential Iran peace deal bolstered the currency's safe-haven appeal. Investors now turn their attention to the monthly US payrolls report, which could offer fresh clues on the Federal Reserve's next policy move.

According to a survey of economists, nonfarm payrolls are expected to have increased by 80,000 in July, following a rise of 57,000 in June. The unemployment rate is forecast to remain unchanged at 4.2%. A softer-than-expected reading could trigger a modest dollar selloff, according to Nick Rees, head of macro research at Monex Europe.

The dollar index, which measures the currency against a basket of six peers, was slightly lower at 99.926 but up just over 0.1% for the week, recovering from a 1.6% drop the previous week. Against the yen, the dollar traded around 0.1% lower at 158.29, after gaining 0.4% on Thursday. The dollar-yen pair was on course to rise nearly 0.5% this week, rebounding from a 13-week low of 155.20 hit on Monday following joint Japan-US intervention.

In the Gulf, tensions remained elevated. A senior Saudi official said Saudi Arabia expects coordinated attacks by Iraqi militias from the north and Yemen's Houthis from the south, under the supervision of Iran's Revolutionary Guards. Meanwhile, investors weighed signs that Gulf states and Iran were moving closer to a temporary agreement to reopen the Strait of Hormuz, which could pave the way for broader talks. Brent crude was last down 0.7% at $81.9 per barrel.

Analysts noted that the dollar was supported by higher oil prices after reports suggested a US-Iran deal to reopen the strait was further away than hoped. Additionally, a Financial Times report cited sources close to Fed Chair Kevin Warsh, hinting at a potential September rate hike depending on incoming data. However, Kristina Clifton, an economist at Commonwealth Bank of Australia, expects the Fed to wait until December before starting a modest tightening cycle. The central bank left rates unchanged last month, with Warsh reiterating his commitment to bringing inflation down.