Dollar Rises to Two-Week High Amid Fed Hike Bets and Energy Worries

The US dollar has seen a moderate surge on Monday, reaching its highest point in two weeks. The index tracking the currency against six major peers rose nearly 0.5% to 99.59, last seen on September 2.

This increase is largely attributed to rising bets of a Federal Reserve rate hike on Wednesday, which has pushed bond yields to multi-year or multi-decade highs in the US, Europe, and Japan. The dollar's strength is also partly due to concerns over energy supplies following Houthi strikes on Saudi Arabia, the world's biggest oil exporter.

Meanwhile, the yen has given up some of its recent gains, hovering near a seven-month high as investors await the Bank of Japan's decision on interest rates on Friday. The dollar was last up 0.7% against Japan's currency at 154.61 yen, from almost seven-month low below 153.

Francesco Pesole, currency strategist at ING, notes that Gulf developments remain concerning and AI-related headlines are weighing on equities, supporting the dollar in this environment. However, Lee Hardman, senior currency analyst at MUFG, cautions that the Fed may be reluctant to hike rates too aggressively in an election year, potentially limiting the dollar's gains.