Dollar Hits Two-Week High Amid Energy Shock Concerns

The US dollar rose to a two-week high on Wednesday, as investors sought safe-haven assets due to growing concerns about the economic impact of energy shocks. The conflict between Iran and its Arab neighbors also weighed on global markets.

The greenback tends to benefit from higher oil prices because the US economy is less exposed to energy shocks than many other major economies. This has led to a widening rate differential in favor of the dollar, with the euro and yen falling against it.

Most economists expect the European Central Bank to finish its tightening cycle by the end of the year, while the Federal Reserve will likely begin raising rates in 2027. This expectation has widened the gap between interest rates in Europe and the US, making the dollar more attractive.

However, a selloff in US Treasuries driven by concerns about inflation and debt levels can weigh on the dollar. The yield on the benchmark 10-year note rose to 4.8182%, its highest point since November 2023.