SINGAPORE/LONDON, June 19 (Reuters) - The dollar edged up on Thursday as the threat of a broader Middle East conflict loomed over markets, while a flurry of central bank decisions, including a surprise cut from Norway kept traders busy.
Rapidly rising geopolitical tensions have boosted the dollar, which has reclaimed its safe-haven status in recent days.
Iran and Israel carried out further air attacks on Thursday, with the conflict entering its seventh day. Concerns over potential U.S. involvement have also grown, as President Donald Trump kept the world guessing about whether the United States will join Israel's bombardment of Iranian nuclear sites.
The Federal Reserve left rates steady on Wednesday. The Bank of England also left rates unchanged on Thursday, citing elevated global uncertainty and persistent inflation as concerns for the economic outlook. The pound fell initially, but later recouped most of those losses.
The Swiss franc, meanwhile, was stronger against the dollar following an expected rate cut from the Swiss National Bank.
But the surprise came from the Norges Bank, which delivered a 25 bps rate cut, while markets had expected the Norwegian central bank to hold rates.
The dollar and the euro both surged against the Norwegian crown, and were last up 1% and 0.7% < EURNOK=D3>. The crown is still one of the top-performing major currencies against the dollar this year, with a gain of around 11%.
Meanwhile, the euro held in negative territory at $1.1484. The dollar rose 0.3% against the yen to 145.62 .
The dollar index , which measures the currency against six others, was flat at 98.9 and was set for about a 0.8% gain for the week, its strongest weekly performance since late February.
Some analysts said investors were looking to cover their short-dollar positions.
"The dollar seems ripe for a short-covering rally - especially if the U.S. wades into the Middle East conflict," said Matt Simpson, a senior analyst at City Index.
U.S. markets are closed on Thursday for the federal Juneteenth holiday, which could mean liquidity is lower.
FED STANDS PAT
In a widely expected move, the Fed held rates steady, with policymakers signalling they still expect to cut rates by half a percentage point this year, although not all of them agreed on a need for rate cuts.
Fed Chair Jerome Powell said goods price inflation will pick up over the course of the summer as Trump's tariffs start to impact consumers.
"Ultimately, the cost of the tariff has to be paid, and some of it will fall on the end consumer," Powell told a press conference on Wednesday. "We know that because that's what businesses say. That's what the data say from the past."
The comments from Powell underscore the challenge facing policymakers as they navigate uncertainties from tariffs and geopolitical risks, leaving markets anxious about the path of U.S. interest rates.
Still, traders are pricing in at least two rate cuts this year though analysts are unsure of the starting point.
"The market is anticipating two 25 bp rate cuts this year, most probably September and December, but, we think the September FOMC will come too soon for the Fed to be comfortable cutting rates," ING economists said in a note.
The Australian dollar fell 0.6% at $0.6469, while the New Zealand dollar slipped 0.9% to $0.598.
Reporting by Ankur Banerjee in Singapore Editing by Jacqueline Wong, Muralikumar Anantharaman and Frances Kerry
