Dollar Firms Ahead of Inflation Data Amid Middle East Tensions

The US dollar firmed up in Asian trade on Wednesday as markets anxiously awaited the release of inflation data for clues to the Federal Reserve's next move. The greenback received limited additional strength after renewed attacks on shipping in critical waterways in the Middle East.

The yen was down 0.1% against the dollar at 159.44 yen, reaching its softest levels of the month despite joint intervention by US and Japanese authorities to strengthen the Japanese currency. The euro slipped 0.1% to $1.1534.

Analysts at ING wrote that there is a path ahead for easing in inflation as the remainder of 2026 progresses, assuming oil prices remain contained and the Strait of Hormuz reopens. However, if CPI disappoints today, speculators will likely trim their long USD positions against the NZD, EUR, and JPY.

Oil prices edged up in Asian trade, with Brent crude 0.9% higher at $89.69 a barrel after an attack by Iran-backed Houthis on a cargo ship in the Bab el-Mandeb strait and a US military strike on a container ship off Pakistan attempting to break its blockade of the Strait of Hormuz.