Dollar Soars on Oil Price Fears and Diverging Monetary Policies

The dollar reached a two-week high on Wednesday as investors sought safe-haven assets amid growing concerns about the economic impact of rising oil prices.

The U.S. and Iran found themselves back on a war footing, leading to increased tensions in the region.

This has driven demand for the greenback, which tends to benefit from higher oil prices due to the U.S. economy's relatively low exposure to energy shocks.

While the European Central Bank is expected to be near the end of its tightening cycle after next week's rate hike, the Federal Reserve may need to raise rates in 2027, widening the rate differential in favour of the dollar and leading to a weaker euro by year-end.