By Lucy Raitano and Jiaxing Li

(Reuters) - The dollar held near a one-week high on ​Wednesday on renewed uncertainty in the Middle East and as traders digested a hotter-than-expected U.S. inflation print and closely watched the yen.

The ‌euro slipped 0.26% to $1.17095 and sterling traded 0.1% lower at $1.3524 <GBP=D3>.

The risk-sensitive Australian dollar was unchanged at $0.72410 and the New Zealand dollar traded down 0.3% at $0.59345.

The U.S. dollar index , which tracks the greenback against a basket of six major currencies, was up 0.2% at 98.501, its highest level since May 5.

Meanwhile, oil prices fell 1% but stayed firmly above the $100 mark, with Brent crude futures last ​trading at $106.6 a barrel.

Hopes for a peace deal in the Middle East have dwindled after President Donald Trump said a ceasefire with ​Iran was "on life support" after Tehran rejected a U.S. proposal to end the war.

Trump said on Tuesday that ⁠he does not think he will need Beijing's help to end the war with Iran ahead of his meeting with Chinese President Xi Jinping ​later this week.

"What's going on in the Strait of Hormuz... that's the main driver in the background," said Tommy von Brömsen, FX strategist at Handelsbanken ​in Stockholm.

"The longer this goes on the more central banks are going to find themselves in a more difficult situation."

U.S. CPI HOT

The U.S. consumer price index rose 3.8% in the 12 months through April, the biggest year-on-year increase since May 2023, as the oil shock triggered by the war pushed prices higher.

Yields on the U.S. ​two-year note , which typically moves in step with Federal Reserve interest rate expectations, and the benchmark 10-year note hovered near seven-week highs; they last ​traded at 3.9812% and 4.461%, respectively.

Markets have largely priced out any chance of a rate cut from the Fed this year, while expectations for a hike ‌of at ⁠least 25 basis points at the central bank's December meeting rose to 35%, according to CME's FedWatch Tool.

Commerzbank FX analysts said the extent of the jump in CPI was surprising and interesting ahead of Fed chair Jerome Powell's term ending on Friday. On Tuesday, the U.S. Senate confirmed Kevin Warsh to a 14-year term as Federal Reserve governor, an important step towards him succeeding Powell.

"The big question in the coming months will be ​whether Warsh can gather enough allies ​within the FOMC to push ⁠through early rate cuts," the Commerzbank analysts said in a report.

YEN IN FOCUS

The Japanese yen fell 0.1% to 157.77 per dollar. A sudden move stronger on Tuesday had stoked speculation of a "rate check" by authorities, which is often a ​precursor to a currency intervention.

On Tuesday, U.S. Treasury Secretary Scott Bessent said the U.S. and Japan believe that excess ​volatility in the currency ⁠market is undesirable, comments that were seen as offering some support to Tokyo's recent round of intervention to prop up the yen.

"My concern is that I don't think intervention alone is going to be sufficient to strengthen the yen at this point," said Idanna Appio, portfolio manager at First Eagle ⁠Investments.

On Wednesday, ​the Bank of Japan said that Bessent did not meet with BOJ Governor Kazuo Ueda ​during his visit to Tokyo.

China's yuan traded around 6.79 per dollar, near its strongest level since February 2023, ahead of Trump's trip to Beijing.