Dollar Holds Firm as Fed Decision Looms Amid Middle East Tensions

The US dollar maintained its strength on Wednesday, holding near a one-month high due to safe-haven flows triggered by escalating hostilities in the Middle East. The Federal Reserve's interest rate decision later in the day is expected to have a significant impact on currency markets.

Oil prices surged after the US military intercepted multiple ballistic missiles launched by Iran towards US forces in the region, adding to inflation concerns. This has kept the euro languishing near a one-month low at $1.1386, having fallen 0.3% for the month so far, while sterling was down 0.06% at $1.3282.

Fabien Yip, a market analyst at IG, expects the Fed to keep interest rates on hold later on Wednesday. He believes that the ongoing uncertainties in the Middle East will continue to support the dollar's strength.