Dollar Soars to Near Two-Week High on Oil Price Surge, Fed Hike Bets
The US dollar has reached near two-week highs due to surging oil prices and increased expectations of a Federal Reserve interest rate hike. Oil prices have climbed to $107 a barrel, nearing a four-month peak, after Yemen's Iran-aligned Houthis attacked Saudi Arabia and Gulf-Iran talks were postponed. This added to inflation worries, driving benchmark 10-year Treasury yields to breach the key psychological level of 5% for the first time since October 2023.
The dollar index, which measures the greenback against a basket of currencies, was last at 99.55. The euro and sterling were slightly weaker against the dollar at $1.1538 and $1.3494, respectively. The yen also pulled away from a seven-month high, down roughly 0.2% at 154.72 ahead of an expected Bank of Japan rate hike on Friday.
Market analysts now see a Fed hike on Wednesday as nearly certain, with CME's FedWatch tool pricing in a roughly 93% chance of an interest-rate increase, which would be the first in more than three years. Christopher Wong, FX analyst at OCBC, said that the combination of higher oil prices, higher US yields, and weaker risk appetite helped lift the US dollar broadly.