Dollar Holds Near Two-Month Peak as US-Iran Tensions Lift Oil and Fed Rate Hike Odds
The U.S. dollar stayed close to a two-month high on Monday, buoyed by rising oil prices after the US-Iran standoff and expectations of further Federal Reserve tightening.
On Monday the dollar index was steady at 101.16, positioning the currency for its biggest monthly rise since June, a 1.7% increase. The euro slipped toward a two-month low at $1.1370, while sterling lingered near a three-month trough. Oil prices jumped more than 3%, with Brent futures topping $108 per barrel after President Donald Trump dismissed a proposed US-Iran peace agreement, feeding inflation concerns.
Analysts linked the oil surge to a more hawkish Federal Reserve outlook, and market pricing now reflects a 70% probability of a quarter-point rate hike at the October meeting and expectations of four hikes within twelve months. Investors will watch the Personal Consumption Expenditures index on Wednesday and the non-farm payroll report on Friday for further clues. Meanwhile, the yen modestly appreciated after Japanese officials reiterated coordination with Washington on currency issues.
Why it matters
The dollar's strength influences global trade, borrowing costs and inflation expectations worldwide.
How this story developed
- Sep 17 Fed’s Unanimous Rate Hike Signals Hawkish Shift, Sparking Market Unease
- Sep 20 The Fed implemented a modest rate increase and a hawkish tone from the new chair.
- Sep 22 Meta's new Muse AI assistant sparked an 11% jump in its stock, lifting other AI-related shares, while oil prices rose and bond yields nudged higher.
- Sep 28 Asian equity markets opened with restraint on Monday as oil prices surged amid lingering US-Iran tensions, while higher bond yields added pressure.
- Sep 28 Oil prices spiked sharply, pushing bond yields higher and prompting mixed moves in Asian equities.
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