Dollar Hits Two-Month High as Oil Prices Surge

The US dollar rose for a fourth consecutive day on Thursday, reaching its highest level since July 28. The, which tracks the greenback against a basket of six major peers, was up 0.2% to 101.26.

The rise in the dollar comes as oil prices surged for a second straight session, driven by fading hopes for a diplomatic breakthrough between the US and Iran. President Donald Trump's threat to 'annihilate' Iran at the UN General Assembly this week has increased tensions, while indirect talks have taken place on the sidelines.

A report from S&P Global showed that US business activity accelerated in September, with the fastest pace of growth since July 2021. However, inflationary pressures intensified, with average input costs jumping and the overall rate of inflation reaching its highest since October 2022. This has boosted expectations for a Fed rate hike in October.

According to José Torres, senior economist at Interactive Brokers, market participants believe that Fed Chair Kevin Warsh is willing to hike interest rates many more times to battle inflationary pressures. However, he notes that the effects of tariffs are largely behind us and wage bills are in check, which suggests that further tightening may not be necessary.