Dollar Firms on US-Iran Tensions and Hawkish Fed Bets

The dollar held its ground on Monday, near a two-month high, as US-Iran tensions pushed up oil prices and bond yields. The euro and sterling were weaker against the greenback, with the euro at $1.1386 and sterling at $1.3247.

Oil prices surged over 3% to above $107 a barrel, following US President Donald Trump's rejection of a peace deal with Iran. This has heightened inflation concerns and led traders to price in a more hawkish Federal Reserve.

Sim Moh Siong, FX strategist at OCBC, said the greenback 'could overshoot in the near term if energy market tensions persist and inflation risks continue to build.' The bank's base case remains for a moderate dollar rally into year-end.