Dollar Soars on Middle East Tensions and Tariffs
The US dollar is poised to post its largest weekly gain in over a month, bolstered by safe-haven demand and expectations of interest rate hikes to combat oil-driven inflationary pressures.
The greenback's strength comes as tensions in the Middle East escalate, with Iran-backed Houthi militants launching attacks on Saudi Arabian tankers. The global oil benchmark, Brent crude, surged above $100 a barrel for the first time since May, and is set to see a more than 25% jump in two weeks.
Inflationary concerns are also being fueled by trade tensions, with President Donald Trump imposing new double-digit tariffs on imports from 60 top trading partners of the US. The move has led to a surge in U.S. Treasury yields, with the benchmark longer-end 10-year yield climbing 14 basis points for the week.
The dollar's advance is also being driven by expectations of Fed rate hikes, with the odds of a quarter-point hike ticking up to nearly 38% from around 13% a week ago, according to the CME FedWatch tool. José Torres, senior economist at Interactive Brokers, noted that 'the descent [in inflation] is emblematic of inflation that can quickly improve if or when President Trump finds a way to peace in the Middle East.'