The dollar steadied at a six-week high in Asian trade on Friday as markets focused on negotiations to end the U.S.-Iran war.
The Japanese yen weakened slightly after softer consumer inflation data for April, though markets still expect more rate hikes by the Bank of Japan.
Broader Asian currencies broadly weakened as uncertainty over the Iran war and its effect on interest rates kept traders risk-averse.
The dollar index and futures remained close to levels last seen in early April. The greenback is set for a flat weekly performance after sharp swings.
U.S. officials noted progress towards a peace deal, with President Trump saying he would hold off on military action until Iran responds to a new proposal.
Iran said it is reviewing the U.S. stance. However, Iran's enriched uranium stockpile remains a key sticking point, and the Strait of Hormuz reopening is deadlocked.
Expectations of a more hawkish Fed supported the dollar after the late-April meeting minutes showed more policymakers considering rate hikes due to energy-fueled inflation.
The USD/JPY pair rose 0.1% to above 159 yen. Japan's CPI inflation fell to a four-year low in April, with core inflation well below the BOJ's 2% target.
However, the softer inflation was largely due to government subsidies on electricity and gas. Underlying inflation remained relatively upbeat, keeping rate hike expectations intact.
The yen is set for mild weekly losses after appreciating sharply in early May due to government intervention.
Broader Asian currencies moved in a flat-to-low range. The Chinese yuan and Taiwan dollar were flat. The Australian dollar fell 0.1% after weak jobs data.
The South Korean won rose 0.4%, near its highest since early April. The Indian rupee rose 0.3% after falling from record highs, with reports of RBI intervention.
