War Hawks in Washington Give Dollar a Boost Amid Iran Tensions

Iran's conflict with the US has sent shockwaves through global markets, causing Brent crude to jump past $90 a barrel and pushing up the odds of a September Federal Reserve rate hike.

The US Dollar Index climbed to 99.73 on Wednesday morning, its highest level in nearly three weeks, as traders now put the chances of a Fed rate hike at near 65-70%, rather than a cut.

Higher US rates make dollar assets more attractive relative to other currencies, which is behind both the stronger DXY and the rising 10-year Treasury yield at 4.81%.

The winners are short-term investors holding short-dated Treasury bills, whose yields rise with the policy rate, while emerging markets carrying dollar-denominated debt face a double blow: higher borrowing costs in sympathy with Washington's rates, and a stronger dollar that raises the local-currency cost of repayment.