The US dollar maintained its position near an 18-month high during early Asian trading on Monday, as investors remained cautious amid escalating Middle East tensions and ahead of key US inflation data due later this week. The dollar index, which tracks the greenback against six major currencies, stood at 102.14, just below its recent peak. Analysts at Commonwealth Bank of Australia noted that attacks by Yemen’s Iran-backed Houthis on Saudi Arabia’s energy assets were likely to sustain upward pressure on oil prices and support the dollar’s strength.
Geopolitical risks dominated market sentiment, with oil prices fluctuating after reports of tanker attacks over the weekend and US President Donald Trump’s announcement of an energy ceasefire between Ukraine and Russia. While Iran confirmed receiving a US peace proposal, analysts do not anticipate a breakthrough in the near term. The dollar’s rally may face a pause, according to Barclays, as tight financial conditions could prompt the Federal Reserve to adopt a more reassuring tone ahead of its late-October interest rate meeting.
The euro rose slightly to $1.121, ending a five-week losing streak amid concerns over France’s fiscal health and political uncertainty. Analysts at OCBC FX strategists suggested that while higher borrowing costs might not immediately discipline French fiscal policy, the euro’s gains are likely to be limited by Europe’s broader economic challenges. Meanwhile, the dollar’s strength against other currencies, including the yen and the Chinese yuan, reflected its role as a safe-haven asset in volatile markets.
In cryptocurrencies, Bitcoin and Ethereum saw fluctuations, with market participants closely watching the US consumer price index report set for Wednesday. This data is critical as it will influence the Federal Reserve’s next move on interest rates, with traders currently pricing in an 81% chance of the Fed holding rates steady this month.