Dollar Holds Gains as Middle East Tensions Fuel Energy Price Surge

The US dollar maintained its gains on Friday as energy prices continued to surge in response to ongoing Middle Eastern tensions. The U.S. dollar index stood at 99.081, holding steady after rising 0.3% on Thursday to reach its highest level since September 7.

Energy prices have risen for six consecutive days, with Brent crude futures increasing by 1.2% to $108.96 a barrel. This has led to an increased chance of a Federal Reserve rate hike next week, now at 70%, according to Tony Sycamore of IG in Sydney.

Against the yen, the dollar was firmer by 0.1%, while the euro strengthened by a similar magnitude. However, the Japanese currency regained some strength after data showed wholesale inflation rose 7.6% in August from a year earlier, bolstering the case for a rate hike this month.

Markets are awaiting the release of U.S. CPI data later on Friday, one of the last major economic data points released before the Federal Reserve meets next week. Fed funds futures are pricing an implied 71.3% probability of a 25-basis-point hike at the U.S. central bank's next two-day meeting ending on September 16.