The greenback is 1.3% firmer on the yen for the week so far, and up 0.6% against a basket of currencies. The prospect of war in the Middle East ebbed on Wednesday as the United States and Iran backed away from further confrontation following a U.S. drone strike that killed a top Iranian military commander, and an Iranian attack on U.S. forces in Iraq in response. The yields on U.S. government debt are now above where they were before the Jan. 3 drone strike that sparked fears of a broader conflagration. Higher bond yields support currency prices by attracting capital flows. The dollar was steady at $1.1105 per euro EUR= and $1.3066 per pound GBP . Against the yen it held at 109.53 yen per dollar JPY , near a two-week high hit overnight. An outlier this week has been the Chinese yuan, which has climbed to a five-month high, despite the geopolitical turbulence, on growing optimism as the Jan. 15 date for signing the Sino-U.S. trade deal nears.