The safe-haven dollar held near a 14-month high against the euro on Thursday as rising energy prices heightened fears that inflation could undermine economic growth and prompt the Federal Reserve to act more quickly to normalise policy.
The US currency remained stable at $1.1558 per euro after strengthening to $1.1529 on Wednesday for the first time since July last year.
The dollar index, which measures the dollar against a basket of six peers, was little changed at 94.188 on Wednesday after rising almost 0.5% in the past two sessions. The index hit a yearly high of 94.504 last week.
The Japanese yen, another safe haven, was largely unchanged at 111.375 per dollar, about midway through the last week and a half.
Crude oil rose to a seven-year high overnight before catching its breath from its recent surge, while natural gas jumped to a record peak in Europe and coal prices from major exporters also hit an all-time high.
"All the talk on (trading) platforms, social media and broad markets has been around Nat Gas and it's been a stunner," Chris Weston, head of research at broker Pepperstone in Melbourne, wrote in a note to a client called "OMGas. ".
"Traders feared the risks of stagflation were growing and wondered how central banks were dealing with the stagflation caused by the supply shock."
Investors were also left tense about negotiations over the US debt ceiling, even as the top Republican in the US Senate, Mitch McConnell, said his party would allow an extension of the federal debt ceiling until December, a move that would prevent a historic default with severe economic losses.
The Federal Reserve, which has so far largely argued that inflationary pressures would prove temporary, said it would likely begin reducing its monthly bond purchases as early as November before taking action to raise interest rates.
Employment has been the Fed's other main focus, and the closely watched non-farm payrolls report on Friday could provide further clues to the timing of the Fed's next moves.
Economists expect the labour market to continue to improve, with the consensus forecast to add 473,000 jobs in September, according to a Reuters poll.
US private sector jobs increased more than expected in September as COVID-19 infections began to subside, allowing Americans to travel, visit restaurants and re-engage in other activities with which they often come into contact, the ADP national employment report showed on Wednesday.
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Meanwhile, bitcoin, the world's largest cryptocurrency by market value, hovered near a nearly five-month high of $55,800 reached on Wednesday, with the latest trade around $54,881.