Dollar Hits Two-Week High as Oil Prices Soar and Fed Rate Hike Bets Rise

The US dollar strengthened to a two-week high on Monday due to rising oil prices and increased expectations of a Federal Reserve rate hike. The dollar index, which tracks the currency against six major peers, rose by almost 0.5% to 99.59.

This increase was driven in part by the conflict in the Middle East, particularly Houthi strikes on Saudi Arabia's oil facilities, which sent global bond yields back towards multi-year highs. The price of oil jumped 3% to $108 a barrel.

Rising bets on a Federal Reserve rate hike also contributed to the dollar's strength, with money markets pointing to a roughly 90% chance of a rate increase, up from around 60% a week ago. This has led some analysts to suggest that the Fed may be reluctant to hike rates too aggressively in an election year.