Dollar steady before US inflation data; yen under pressure

The dollar steadied on Tuesday ahead of ​U.S. inflation data, with Middle East tensions lifting oil prices while the yen was calm amid caution over possible intervention and ‌after policymakers' comments on state pension fund allocations.

The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, eased 0.09% to 101.18, Reuters reported.

Inflation risks remain in the spotlight with the release of U.S. June CPI data on Tuesday, June PPI gauges the following day, and Fed Chair Kevin Warsh's first semiannual testimony before Congress.

Concerns over escalating tensions between the United States and Iran returned to the fore, with President Donald Trump saying on Monday Washington was reinstating a naval blockade on Tehran and would ensure the Strait of Hormuz remained open for a fee following fresh exchanges of missile ⁠and drone strikes.

U.S. and Iranian forces exchanged heavy missile and drone assaults at the weekend, with Tehran striking U.S. facilities in states across the Gulf on Sunday and saying it had again closed the vital Strait of Hormuz shipping route.

Oil prices climbed nearly 3% on Tuesday to their highest point in four weeks after the U.S. said it would reimpose a naval blockade, heightening uncertainty about energy flows.

The euro was up 0.1% against the dollar at $1.1392 and sterling gained 0.09% to $1.3358.

Meanwhile, Federal Reserve Governor Christopher Waller said rates may need to rise "in the near term" if data shows inflation remaining well above the central bank's 2% target.

A core CPI reading of 0.3% or higher would likely imply, depending on PPI data due later in the week, that the Fed's preferred core PCE deflator is also running at 0.3% or above, said Ray Attrill, head of FX strategy at National Australia Bank, in a podcast.

"That may well be a trigger for a Fed rate hike as early as the ‌July meeting," ⁠Attrill said.

Economists' median estimate for the June core CPI was 0.2% growth month-on-month.

Fed funds futures are pricing in about 43 basis points of rate hikes by the U.S. central bank this year, according to LSEG data.