Dollar Index Holds Near Three-Week High Amid Hawkish Fed Bets
The US Dollar Index (DXY) has held gains near its three-week high of 101.50 due to a revival in hawkish Federal Reserve (Fed) bets. The renewed expectations of interest rate hikes have been fueled by surging oil prices, which have risen to near $90.60 and are close to their six-week high of $92.25.
The closure of the Bab el-Mandeb Strait has disrupted 27% of global energy supply, leading to higher inflation expectations that discourage Fed officials from considering loose monetary conditions. US President Donald Trump warned that Washington would hold Iran responsible for the Yemen-based Houthis' actions and threatened a 'major military punishment'.
According to the CME FedWatch tool, the odds of the Fed delivering an interest rate hike in its next policy meeting stand at 35.8%, significantly higher than the 11.8% recorded last week.