Dollar Surges as Iran Tensions Lift Oil Prices

The US dollar continues to firm up against major currencies as tensions between the US and Iran remain high, pushing oil prices above $106 a barrel. The dollar index, which measures the greenback's value against a basket of peers, is on track for its best month since June with a gain of 1.7% in September.

Investors are looking ahead to a data-packed week, with key releases including US inflation data and non-farm payrolls. The market is already pricing in a more hawkish Federal Reserve, with a 65% chance of a rate hike at the end of October, according to CME Group's FedWatch tool.

Sim Moh Siong, FX strategist at OCBC, notes that the greenback could overshoot in the near term if energy market tensions persist and inflation risks continue to build. The Reserve Bank of Australia is expected to raise interest rates by 25 basis points on Tuesday, which may also contribute to the dollar's strength.