Dollar Rises to Near Two-Week Highs on Surging Oil Prices and Fed Hike Expectations

The US dollar has risen to near two-week highs due to surging oil prices and expectations of a Federal Reserve interest rate hike this week. The dollar index, which measures the greenback against a basket of currencies, is at 99.55.

Oil prices have climbed to $107 per barrel, nearing a four-month peak after Yemen's Iran-aligned Houthis attacked Saudi Arabia and Gulf-Iran talks were postponed. This has added to inflation worries and driven benchmark 10-year Treasury yields above 5% for the first time since October 2023.

Analysts at OCBC note that the combination of higher oil, higher US yields, and weaker risk appetite has lifted the US dollar broadly. However, with a hike now heavily priced in, further dollar upside will likely require the Fed to keep the door open to additional tightening.