The dollar has recorded significant gains after an Iranian missile attack on Israel, prompting a surge in safe-haven asset purchases as investors worry about escalating conflicts in the Middle East. The dollar increased against the yen, particularly after Japan's new Prime Minister Shigeru Ishiba played down the likelihood of further interest rate hikes by the Bank of Japan.

On Wednesday, the dollar maintained its upward momentum, trading at $1.1069 against the euro, which remained stable after a notable drop of 0.6% earlier in the week. The U.S. dollar index, which measures the currency against a basket of other currencies, held steady at 101.32 after a 0.5% increase on Tuesday.

Iran characterized its missile strike on Israel as its largest military operation against the country, claiming it was a response to Israeli actions against militant leaders and aggression toward Hezbollah in Lebanon. Iran stated it fired over 180 ballistic missiles but indicated that this operation was concluded unless further provocations occurred. Both Israel and the U.S. have vowed to respond to Iran’s actions.

Oil prices became a key focus amid the tensions, with Jane Foley, head of FX strategy at Rabobank, noting that the market appears to be reacting to oil price movements. Brent crude oil was trading around $75 a barrel.

In Japan, the dollar rose by 0.77% against the yen, setting the exchange rate at 144.71 yen per dollar. Bank of Japan Governor Kazuo Ueda did not confirm any plans for continued rate hikes, while PM Ishiba suggested that Japan is unlikely to see another interest rate increase, contributing to further yen depreciation.

The Swiss franc and British pound showed only minor fluctuations against the dollar. Speculation about a potential rate cut by the European Central Bank (ECB) this October contributed to the euro's recent decline, which was also influenced by stronger-than-expected U.S. job data.

Market attention is now turning to upcoming U.S. private payroll data and the employment report for September. Additionally, dockworker strikes on the East and Gulf Coasts are disrupting nearly half of the nation’s ocean shipping, which is likely to impact market dynamics.

In political news, Vice Presidential candidates J.D. Vance and Tim Walz recently debated, but the event elicited only a modest reaction from the markets.

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