Dollar Surges Amid Oil Price Spikes and Trade War Escalation
The US dollar strengthened on Friday as investors became more concerned about inflation due to rising oil prices and renewed global trade tensions. The dollar's value increased against several currencies, including the yen, which fell to a 40-year low at 163.86 per dollar.
Oil prices surged above $100 a barrel for the first time since May after Yemen's Houthis struck two Saudi oil tankers in the Red Sea. US President Donald Trump threatened 'major military punishment' against Iran and its Houthi allies, adding to inflationary pressures.
US Treasury yields rose to an 18-month high above 4.7% as investors became more concerned about inflation. The 30-year yield also increased, while 2-year yields reached their highest level since February 2025 at 4.3555%. Vishnu Varathan, head of macro strategy for Asia-Pacific at Mizuho, warned that the world may see a 'double whammy' of tariffs and supply disruptions.
The Australian dollar was little changed at $0.6968, while the New Zealand dollar edged 0.08% higher to $0.5776. Investors are now preparing for major central bank decisions next week, including from the Federal Reserve, where policymakers must contend with mounting inflationary pressures.