Dollar Hits Seven-Week High as Oil Prices Fluctuate Amid Iran's Offer
The US dollar briefly reached a seven-week high on Tuesday before stabilizing against a basket of currencies. This move was partly due to earlier gains in oil prices, which were influenced by concerns over shipping risks and the United States' position as a net oil exporter.
However, crude prices fell after Japan's Kyodo News reported that Iran had offered to reopen the Strait of Hormuz within seven days if the US took steps to ease military pressure. This led to a decline in dollar gains, which had benefited from its traditional safe-haven role.
The US Dollar Index (DXY) rose 0.1% to 100.514 after earlier reaching a high of 100.667. Meanwhile, markets are betting on further US interest rate hikes following the Federal Reserve's recent decision to raise rates by a quarter percentage point and signal additional moves could follow.
The euro faces the risk of further declines amid fading expectations for an October interest rate hike from the European Central Bank. ING's Francesco Pesole noted that investors seem increasingly ready to accept this narrative, which could lead to further downside pressure on EUR/USD in the near term.