Dollar Holds Ground Amid Oil Price Surge and Inflation Data Release
The US dollar held its ground near its highest level of the past week after a spike in oil prices due to conflict in the Middle East. The U.S. dollar index, which tracks the currency against six peers, rose 0.4% the previous day and was trading slightly higher at 99.15 on Friday.
The jump in oil prices pushed up bond yields ahead of the release of US inflation figures later that day. Brent crude oil prices were on track to rise more than 7% for the week after Iran-aligned Houthis seized control of Yemen's port city of Mocha and advanced down the Red Sea coast.
However, energy prices fell back on Friday with Brent down 4% at $104 a barrel. Francesco Pesole, currency strategist at ING, said 'developments in the Gulf leave the balance of risks skewed towards higher oil prices, while stress in bond markets is increasingly bleeding into risk assets.' That combination should favor a defensive rotation back into the dollar.