The US Dollar Index holds steady above the 98.00 level as a fragile ceasefire in the Middle East keeps markets cautious.

• The US Dollar Index trades sideways near 98.25 during Friday’s Asian session.
• Donald Trump signals optimism over a potential peace agreement with Iran.
• Meanwhile, markets anticipate that interest rates will remain unchanged throughout the year.

The US Dollar Index (DXY), which tracks the US Dollar against a basket of six major currencies, is hovering around 98.25 during Friday’s Asian session. The index remains largely unchanged as uncertainty persists over the Israel–Lebanon ceasefire. Investors are also looking ahead to potential US–Iran talks this weekend for clearer direction.

A 10-day ceasefire between Lebanon and Israel came into force on Thursday, but tensions in the region remain elevated, supporting demand for safe-haven assets like the US Dollar. On Friday, the Lebanese army accused Israel of breaching the truce, citing sporadic shelling in several southern villages.

At the same time, optimism surrounding a US–Iran ceasefire could limit further gains in the Dollar. A temporary two-week agreement is currently in place and is set to expire next week. US President Donald Trump indicated that the next round of discussions between Washington and Tehran could happen over the weekend.

According to Sim Moh Siong, FX strategist at OCBC, markets are currently consolidating after pricing in earlier optimism about a ceasefire extension. He noted that a new catalyst will be needed to drive clearer directional moves, as the Dollar’s trajectory is no longer one-sided.

Meanwhile, traders are closely monitoring how Federal Reserve officials will respond to inflation risks stemming from the conflict. Fed funds futures suggest that markets still expect the central bank to keep interest rates unchanged this year, Reuters reported.