Dollar Holds Near 18-Month High as ECB Warns on Inflation Risks
The U.S. dollar held firm near an 18-month high on Tuesday, supported by strong U.S. yields. The euro managed a modest recovery, rising 0.2% to $1.1230, after a prolonged decline driven by French bond market volatility and rising energy costs from the Middle East. Against the Japanese yen, the euro gained 0.3%, ending an eight-session losing streak, the longest since 2024.
The dollar index dipped 0.2% to 102.11 but remained close to Monday’s peak of 102.21. Against the yen, the dollar stayed flat around 157.92, as traders weighed U.S. inflation pressures against softer services data.
European Central Bank Chief Economist Philip Lane cautioned that high energy prices in the Eurozone have not yet sparked aggressive second-round inflation effects. In an interview with ANSA, Lane emphasized that the impact of energy costs remains uncertain, suggesting the ECB may avoid rapid policy tightening despite elevated consumer price growth. His comments provided some support to the euro.
Market strategists note that the broader environment still favors the dollar, as U.S. yields remain near multi-decade highs. While recent economic data has softened expectations for an immediate Fed rate hike, strong supply chain cost pressures suggest U.S. rates will stay elevated for longer. Analysts will watch Thursday’s FOMC meeting minutes for further clarity on Fed policy direction.