TOKYO, Sept. 2 (Reuters) - The dollar held firm on Wednesday as renewed hostilities in the Middle East pushed oil prices higher and revived inflation concerns.
The currency's safe-haven appeal has been reinforced by rising Treasury yields and growing expectations of a Federal Reserve rate hike, even as recent economic data came in below forecasts.
The U.S. launched a barrage of airstrikes on Iran on Tuesday, prompting Iranian retaliation in the most serious escalation in weeks. Oil prices rose nearly 1% in early trade on Wednesday, extending the previous session's surge, with Brent futures up 0.92% at $95.52 a barrel and U.S. West Texas Intermediate crude 0.89% firmer at $91.02.
"Continued vigilance is needed over the situation in the Middle East today," said Kumiko Ishikawa, a senior FX analyst at Sony Financial Group.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was at 99.67.
July JOLTS job openings and the August ISM manufacturing index released overnight were below market forecasts, but money markets have reinforced expectations of a Federal Reserve rate hike following Fed Chair Kevin Warsh's speech at Jackson Hole last week.
Markets are now pricing in a 67% chance of a September Fed hike, up from around 40% a week earlier, according to CME Group's FedWatch tool.
"As for the U.S. data, it is worth bearing in mind that, if the figures are weak, their impact could be offset by heightened tensions in the Middle East," Ishikawa said.
August's jobs and consumer price inflation data are both due before the Fed's Sept. 15 to 16 meeting. This Friday's jobs report is expected to show that employers added 56,000 jobs last month, according to the median estimate of economists polled by Reuters.
Fed Governor Michael Barr said on Tuesday that if inflation does not cool quickly, it will be time for the U.S. central bank to increase interest rates.
The yield on benchmark U.S. 10-year notes edged higher to 4.8%, while Japan's benchmark 10-year yield was at 3% Wednesday morning, after reaching the 30-year milestone on Tuesday. Higher yields drive investors to buy safe-haven currencies, including the U.S. dollar, while undermining the case for riskier assets such as equities.
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