Dollar Hits Multi-week Highs As Oil Surges, Yen Near 160

• Fed's divided stance and hawkish tilt push U.S. yields to one-month highs
• Oil spike and Iran conflict fuel risk aversion, supporting dollar
• Yen nears intervention levels, keeping traders on edge

April 30 (Reuters) - The dollar touched a new multi-week high on Thursday as fears of a further escalation in the Middle East lifted oil prices, while the Federal Reserve offered no hint of an easing shift.

Meanwhile, the yen breached the 160 level, bringing greater attention to a possible Japanese intervention.

Fed Chair Jerome Powell closed out his eight years with rates on hold amid rising inflation concerns. The Fed's 8–4 decision to leave rates unchanged was its most divided since 1992, drawing three dissents from officials who no longer think the bank should communicate a bias toward easing.

The hawkish tilt sent yields up US2YT=RR, US10YT=RR to their highest levels since March 27.

Traders priced out Fed cuts this year on Wednesday, with markets assigning a 55% chance of a rate hike by April 2027, up from roughly 20% before the decision.

Trump expects Kevin Warsh, his pick to succeed Powell on May 15, to deliver rate cuts. Warsh has said he did not promise Trump he would do so.

"Now would be a good time to cut interest rates and Warsh should convince his colleagues on the FOMC to take such action," said Michael Pfister, forex strategist at Commerzbank.

"Yesterday’s dissenters show that this will not be easy, if he even wants to," he added, mentioning the removal of the easing bias.

OIL PRICES IN FOCUS

Oil prices rose more than 4% after a report said the U.S. was weighing military options to break the Iran stalemate.

Safe-haven demand lifted the dollar in March after the war broke out, underscored even by the U.S. economy’s relatively lower exposure to higher oil prices compared with the euro zone and Japan.

Analysts have argued that a potential nuclear deal was the main sticking point for a peace deal in the Middle East, as any agreement that leaves Iran's nuclear programme largely unchanged could be politically damaging for the U.S. president at home.

The dollar index =USD was up 0.05% at 98.98 after hitting 99.092, its highest level since April 13.

The euro stood at $1.1679 EUR= and sterling traded at $1.34877 GBP=D3, both little changed.

The Bank of England and European Central Bank will meet later today, with markets closely watching their guidance as expectations grow that both may be forced to raise rates soon.

JAPAN INTERVENTION WATCH

The yen JPY= was down 0.1% at 160.16 per dollar, edging closer to levels that have previously triggered intervention, despite the Bank of Japan signalling after its policy meeting on Tuesday that it could raise rates in the coming months.

The Japanese currency has fallen more than 2% since the war began on February 28 and investors have built the biggest short yen position in nearly two years in a bet that neither rate hikes nor risk of intervention will come to its rescue.

"While this brings the pair closer to intervention territory, the Ministry of Finance will be wary of firing its intervention bullets too early given Japan's vulnerability as a large energy importer and the current stalemate in the Middle East," analysts at IG said in a note.