Dollar Rally Continues as Fed Rate Hike Expectations Rise

The US dollar continued its rally as investors remained focused on the potential Federal Reserve rate hike. Oil prices, which had been boosted by rising tensions in the Middle East, showed little reaction to US President Trump's comments.

Trump's remarks that the conflict with Iran would not last long and his announcement that Russia and Ukraine have agreed not to attack oil facilities failed to push oil prices lower. However, investors remained concerned about the damaged Saudi Arabian oil pipeline and the closure of much of the Strait of Hormuz due to Iranian-planted naval mines.

The dollar's rally continued despite a strong start to the week, with USD/JPY edging higher as investors braced for Friday's Bank of Japan meeting. The risk-on currencies such as the New Zealand dollar and the Australian dollar underperformed, while gold prices continued to decline, down nearly 9% from its late-August peak.