The U.S. dollar strengthened against most of its main rivals Friday in New York, as a popular gauge of the currency hit a fresh 2018 high, and as traders digested a week in which the Federal Reserve signaled that it may adopt a more measured approach to hiking interest rates even if inflation runs ahead of its 2% annual target.

An escalation of tensions^[1] between the U.S. and North Korea, which appeared to ease somewhat ^[2]early in the session, and trade talks with Washington and Beijing^[3] contributed to a week marked by up-and-down trade.

Don’t miss: Here’s how Turkey’s currency woes could undermine Erdogan’s re-election bid^[4]

Also read: Turkish central bank allows some debt repayments at fixed lira rate^[5]

What are currencies doing?

The ICE U.S. Dollar Index DXY, +0.44%^[6] which gauges the U.S. unit against a half-dozen currencies, was up 0.5% at 94.197, headed for 0.6% return on the week. This will be its second straight weekly advance, putting it on track for a 2.6% rise so far in May, according to FactSet data. The gauge set an intraday high for 2018 at 94.2410, exceeding its previous peak for the year hit on Wednesday. A broader measure of the buck’s performance against 16 rivals, the WSJ Dollar Index BUXX, +0.32%^[7] rose 0.3% to 87.28. For the week, that gauge is up about 0.1%.

Read: Being long the dollar is cool again^[8]

Also check out: The strong dollar is a stock-market drag and poses a threat to earnings growth^[9]

The euro EURUSD, -0.5033%^[10] slipped against the buck at $1.1662, compared with $1.1722 late Thursday in New York. For the week, the euro is on track for a 0.9% drop against its U.S. rival, while it is looking at a loss of 3.5% for the month of May so far.

The British pound GBPUSD, -0.4933%^[11] weakened to $1.3316, compared with from $1.3379 in the previous session. For the week, sterling has shed 1.1%, while the currency is on course for a 3.3% drop for May at this point. Worries about inflation and...