Dollar Strengthens Amid Oil Price Surge and Hawkish Fed Bets

The US dollar strengthened to hold near a two-month high on Monday, driven by rising oil prices and investors' anticipation of hawkish Federal Reserve policies. The ongoing US-Iran standoff has pushed up oil prices, with Brent crude futures climbing over 1% to above $106 per barrel.

Euro and sterling weakened against the dollar, trading near multi-month lows. The dollar index, which measures the currency's value against a basket of peers, rose to 101.15, putting it on track for a 1.7% gain in September, its best month since June.

Energy supply risks and robust US fundamentals have heightened inflation concerns, prompting traders to price in more aggressive Federal Reserve policies. Sim Moh Siong, FX strategist at OCBC, said that if energy market tensions persist and inflation risks continue to build, the greenback could overshoot in the near term.