Dollar Rebounds to Summer Highs as Geopolitics and Yields Fuel Rally

The US dollar has returned to its summer highs around 101.0 on the dollar index, driven by rising Treasury yields and oil prices.

This retest of resistance is happening amidst an ongoing reassessment of the Fed's monetary policy outlook, fueled by high levels of geopolitical tension in the Middle East and a desire to tackle inflation.

The US has rejected Iran's proposal for a short-term reopening of the Strait of Hormuz, leading to a rise in Brent crude prices that is pulling the dollar higher at the expense of risk assets.

Bolstered by Treasury bond yields, the US dollar sees no obstacles to continuing its rally. Its rivals have their own vulnerabilities, including the widening yield spread between French and German bonds, indicating political risk in Europe.