The US dollar steadied near a one-week high on Wednesday after President Donald Trump declared that the temporary memorandum of understanding with Iran aimed at ending the conflict between the two countries had "come to an end," while the New Zealand dollar jumped following the central bank's decision to raise interest rates.

The US Dollar Index, which tracks the greenback against a basket of six major currencies, was little changed at 101.17, remaining close to its highest level since July 2 as investors continued to favor the safe-haven currency amid heightened geopolitical uncertainty.

Geopolitical tensions support the US dollar

Jane Foley, Head of FX Strategy at Rabobank, said the US dollar had responded to the latest developments, although markets have become accustomed to treating Trump's remarks with a degree of caution.

"These comments may be intended to bring the other side back to the negotiating table, but they are nevertheless likely to increase market anxiety," she said.

In energy markets, Brent crude futures climbed 6.24% to $78.82 per barrel, extending gains for a second consecutive session.

Trump's comments came after Iran's Revolutionary Guard announced on Wednesday that it had targeted US military sites in Bahrain and Kuwait, following a wave of US airstrikes against Iran in response to attacks on oil tankers in the Strait of Hormuz.

New Zealand rate hike and Fed minutes in focus

Meanwhile, the New Zealand dollar rose 0.26% to US$0.5691 after trimming part of its earlier gains, following the Reserve Bank of New Zealand's decision to raise its benchmark interest rate by 25 basis points to 2.50%, in line with broad market expectations, as policymakers continued efforts to contain inflationary pressures.

The central bank said that "further removal of monetary stimulus is likely to be required" to bring inflation under control.

Westpac analysts wrote in a research note that one of the main reasons behind the rate hike was concern that financial conditions would have become more accommodative had the official cash rate remained unchanged.

Later on Wednesday, investors will turn their attention to the minutes of the Federal Reserve's June policy meeting, the first held under new Fed Chair Kevin Warsh.

Francesco Pesole, FX strategist at ING, said the minutes should provide a clearer picture of how seriously policymakers are considering additional interest rate hikes.

"Based on officials' remarks following the meeting, we see limited scope for a dovish surprise and expect the minutes to reinforce the Fed's hawkish message, providing further support for the US dollar," he said.

However, Pesole added that he does not expect a major breakout for the greenback, as markets may be reluctant to significantly increase rate hike expectations following last week's weaker-than-expected US employment data.

Other currencies

The US dollar rose 0.24% against the Japanese yen to 162.48, extending gains for a fourth consecutive session as traders continued to monitor the possibility of intervention by Japanese authorities.

The euro was little changed at $1.1405, while sterling slipped 0.1% to $1.3334.