The U.S. dollar is heading for its best week in a month as investors flock to the traditional haven asset amid escalating geopolitical tensions. The Bloomberg Dollar Spot Index rose 0.8% this week, marking its strongest performance since early October. Haven flows have accelerated as conflicts in the Middle East and Ukraine intensify, overshadowing mixed U.S. economic data.

Traders are pricing in a more cautious Federal Reserve outlook after recent inflation prints came in hotter than expected. The greenback gained against most G-10 peers, with the euro and yen weakening notably. Treasury yields climbed in tandem, supporting the currency's appeal.

Market participants cite risk-off sentiment as the primary driver, with equity selloffs amplifying demand for dollar liquidity. Hedge funds and asset managers have increased long-dollar positioning to the highest level in weeks, according to CFTC data.