(Updates to US afternoon)

* Dollar index at highest since November

* Energy-sensitive currencies such as euro under pressure

* US consumer spending, core PCE inflation firmer before

Iran war

* Traders bet on Fed rate cut by September

* Yen in intervention territory

By Saqib Iqbal Ahmed

NEW YORK, March 13 (Reuters) - The U.S. dollar rose

across the board on Friday, set for a second straight weekly

gain, as the war in the Middle East drove investors toward

safe-haven assets and weighed on energy-sensitive currencies

such as the euro.

President Donald Trump said the U.S. was going to be hitting

Iran "very hard over the next week", shortly after issuing a

partial 30-day waiver for purchases of sanctioned Russian oil,

hoping to ease prices fuelled by the U.S.-Israeli war on Iran.

A sharp and prolonged rise in oil prices would severely hurt the

economies of Japan and the euro zone, which are heavily reliant

on crude imports, while the United States would be relatively

insulated, having been a net crude exporter for almost a decade.

"Global investors are unwinding cross-border exposures,

pushing money into safe havens, and punishing currencies issued

by net energy importers," said Karl Schamotta, chief market

strategist at Corpay in Toronto.

The euro was 0.6% lower against the dollar at

$1.14395. The dollar index, which measures the

greenback's strength against a basket of currencies, was up 0.7%

at 100.35. The index is up 1.5% for the week.

Schamotta, however, warned that FX markets face two-way

risks.

"As the war drags on, both Tehran and Washington have strong

motivations for returning to the negotiating table and there are

good reasons to suspect they could strike a face-saving bargain

as soon as this weekend," said Schamotta.

INFLATION WATCH

Data on Friday showed U.S. consumer spending increased slightly

more than expected in January, which together with continued

strength in underlying inflation and the dragging war in the

Middle East, bolstered economists' views that the Federal

Reserve would not resume cutting interest rates for some time.

"The latest personal consumption expenditures inflation data

tells us that the inflation picture wasn't looking good even

before the Middle East crisis," Sonu ‌Varghese, global macro

strategist at Carson Group, said in a note.

"An already large headache for the Federal Reserve is going

to turn into an even larger one, and it's likely the Fed will

not cut rates in 2026 and may even start talking about rate

hikes later this year," ‌Varghese said.

EURO PAIN

Investors await the European Central Bank policy meeting next

Thursday, while traders bet that surging oil prices could push

the central bank to hike rates this year.

Still, economists remain wary of monetary tightening in

economies where dependence on fuel imports means surging energy

costs are likely to weigh on growth.

"It has become very clear that shipping through the Strait

of Hormuz could be affected for a while," Jane Foley, head of FX

strategy at Rabobank, said in a note.

"We have therefore reduced our EUR/USD forecasts on a 1- and

3-month view to 1.14 and 1.15 respectively from 1.16," she said.

YEN IN INTERVENTION TERRITORY

Against the Japanese yen, the dollar rose to its strongest

level since July 2024 and was last trading up 0.2% at 159.67

yen.

Japan is ready to take the necessary steps against yen

moves that impact people's lives, Finance Minister Satsuki

Katayama said on Friday, adding that she was in close contact

with U.S. authorities on foreign exchange issues.

"Policymakers are likely to take a dim view of the effect

that exchange rate weakness will have on already-soaring import

bills," Schamotta said, noting that pressure to intervene to

prop up the battered yen could increase in coming days and

weeks.

Leading cryptocurrency bitcoin was 1.2% higher at

$71,021, after rising to a nine-day high earlier in the session.