Dollar Surges as Energy Shocks and Rate Paths Weigh on Majors
The US dollar has risen to a two-week high due to growing concerns about energy shocks and diverging monetary policy paths across major economies.
The Iran-US conflict, which started on Wednesday (Sep 2), is another factor contributing to the greenback's strength. The American economy is less exposed to energy shocks compared to other major economies, making it an attractive safe-haven asset.
Economists at Schroders expect the European Central Bank (ECB) to finish its hiking cycle by the end of the year, while the Federal Reserve will likely start raising rates. This rate differential is expected to widen in favour of the dollar and lead to a weaker euro.
The dollar index rose 0.20% to 99.865, its highest point since Aug 17. The euro was down 0.16% at $1.1575, hitting its lowest since Aug 20. Markets are now pricing in a 68% chance of a September Fed hike.