NEW YORK, May 8 (Reuters): The dollar slipped on Friday, on pace for a second straight weekly fall as investors stayed cautiously optimistic about a swift end to the Middle East conflict, after President Donald Trump said the ceasefire remained in place despite renewed US-Iran hostilities.
The two sides have occasionally exchanged fire since the ceasefire took effect on April 7, with Iran hitting targets in Gulf countries including the UAE.
Analysts said investors were taking heart from the fact that while oil prices were modestly higher, a fragile ceasefire broadly held.
"The U.S. has strongly suggested it is trying to avoid escalation and wants the ceasefire intact," said Kyle Chapman, FX markets analyst at Ballinger Group in London.
The dollar index measured against key peers fell 0.28% at 97.96, after hitting 97.623 earlier this week, its lowest level since February 27, a day before the war started. It was set for a weekly drop of 0.3% after falling about as much the previous week.
The euro was up 0.4% at $1.1773, poised to end the week a touch firmer.
Investors, who had flocked to the safe-haven dollar and sold currencies of oil import-dependent economies such as Japan and the euro area after oil prices surged following Iran's effective closure of the Strait of Hormuz, drifted toward riskier currencies in recent weeks as hopes grew for a resolution to the Iran conflict.
Labor market resilience
The US currency was little-moved after data on Friday showed U.S. employment increased more than expected in April while the unemployment rate held steady at 4.3%, pointing to labor market resilience and reinforcing expectations that the Federal Reserve would leave interest rates unchanged for some time.
Payrolls have been choppy since mid-2025, alternating between gains and losses.
"The payrolls volatility this year should steer the market away from placing too much emphasis on a single print - the trend still leans towards softening, and it points firmly to a Fed on hold this year," Ballinger Group's Chapman said.
Yen supported by intervention risks
Traders remained focused on the Japanese yen after recent interventions and verbal warnings from Tokyo kept sharp selling at bay. Against the yen, the dollar was 0.3% weaker at 156.585.
