Dollar Strengthens on Rate Hikes Amid Ongoing Middle East Tensions

The US dollar steadied near its strongest level in two months on Wednesday due to expectations of interest rate hikes and hawkish rhetoric from major central banks. The euro was at $1.1446, loitering near its weakest level since late July, while the dollar index held around 100.56.

The recent barrage of rate hikes has taken centre stage in currency markets as investors anticipate further tightening. Kieran Williams, head of Asia FX at Intouch Capital Markets, said that the dollar's support from rates looks durable but futures already price more tightening than the Fed's own projections.

Oil prices eased below $100 amid hopes for Iran-US diplomacy over the Strait of Hormuz, reducing energy-driven inflation pressure. The Japanese yen was at 157.55 per US dollar as traders remain wary of the threat of intervention following the Bank of Japan's rate hike to a 31-year high last week.