Dollar Firms as Markets Anticipate Hawkish Rate Hikes

The US dollar gained ground on Monday as investors prepared for key interest rate decisions from the Federal Reserve and Bank of Japan. The yen wobbled near a seven-month high, despite speculation that the BOJ will raise rates this week.

Rising oil prices contributed to a decrease in risk sentiment, with Brent crude futures reaching $106.7 per barrel after new Houthi strikes on Saudi Arabia and Iranian attacks on ships in the Gulf. The escalating conflict has pushed oil well above $100 per barrel, adding to inflationary pressures.

Fed policymakers are expected to raise rates this week, with traders pricing in an 86% chance of an increase according to the CME FedWatch tool. This comes after data showed US consumer prices accelerated in August, fueling expectations for a rate hike.