The US dollar firmed to its highest level in a week against major currencies on Monday before paring gains as renewed US-Iran tensions and fading hopes for a Middle East peace deal sent investors toward safe havens, reports Reuters.

“The weekend escalation revives the geopolitical risk premium just as markets had started pricing a peace dividend,” said Charu Chanana, chief investment strategist at Saxo, adding that higher oil “is not just an energy story, it is a growth-and-rates story.”

At the same time, compared to the sharp jump in oil prices, moves in currency markets were restrained, with the dollar giving back some of its early gains by mid-morning in Asia.

The euro last bought $1.1757 after hitting a one-week low of $1.1729 earlier in the session, while sterling was 0.11 per cent lower at $1.3503. The risk-sensitive Australian dollar fell 0.17pc to $0.7155.

The dollar index, which measures the US currency against six peers, was at 98.30, hovering near its highest in a week and recouping some of its recent losses.

The index is down 1.5pc in April amid rising risk appetite on hopes for a peace deal. The index had surged 2.3pc in March on haven demand after the war broke out.