Dollar Surges to Two-Week High Amid Oil Price Concerns

The US dollar reached a two-week high on Wednesday as investors turned to the currency amid growing concerns about the economic impact of the energy shock. The dollar's value tends to benefit from higher oil prices, which can boost the US economy less exposed to energy shocks than many other major economies.

George Brown, senior economist at Schroders, said that the European Central Bank is likely to finish its hiking cycle by the end of the year, while the Federal Reserve will be just beginning to raise rates. This could widen rate differentials in favor of the dollar and lead to a weaker euro.

The euro was down 0.16% at $1.1575, after hitting $1.1570, its lowest since August 20. The Japanese yen rose 0.45% against the greenback to 159.50 per dollar, but still hovered below the psychologically important 160-per-dollar threshold.

Markets are now pricing in a 70% chance of a September Fed hike, up from around 40% a week earlier, according to CME Group's FedWatch tool. The US Treasury Secretary Scott Bessent voiced strong support for 'decisive' monetary steps to combat yen weakness in a meeting with BOJ Governor Kazuo Ueda.