Dollar Hits Seven-Week High Amid Energy Shock Concerns

The US dollar surged to a seven-week high on Wednesday as investors sought safety in the greenback amidst growing concerns over the economic impact of the energy shock. The conflict between the US and Iran has put pressure on global markets, with oil prices reaching new highs.

According to George Brown, senior economist at Schroders, the ECB is near the end of its tightening cycle after next week's rate hike, while the Federal Reserve will likely be just beginning to raise rates. This divergence in monetary policy paths should widen rate differentials in favor of the dollar and lead to a weaker euro by year-end.

The yen also weakened against the dollar, falling below 160 per dollar as markets weigh the Bank of Japan's rate path. BOJ governor Kazuo Ueda suggested that consecutive rate hikes could be a possibility, which has contributed to the currency's decline.