Dollar Soars as Energy Shock Fears Boost US Currency

The US dollar hit a seven-week high on Wednesday as investors turned to the currency due to concerns about the economic impact of the energy shock. The greenback benefits from higher oil prices because the US economy is less exposed to energy shocks than many other major economies, attracting demand at the expense of currencies like the euro and yen.

George Brown, senior economist at Schroders, expects the European Central Bank to finish its hiking cycle by the end of the year, while the Federal Reserve will likely be just beginning to raise rates. This is expected to widen rate differentials in favor of the dollar and lead to a weaker euro by year-end.

However, a selloff in US Treasuries driven by concerns about inflation and the country's fiscal trajectory can weigh on the dollar. Rising debt levels and persistent price pressures raise doubts about the long-term appeal of US assets.