Dollar Surges on Rate Hike Prospects, Oil Prices Retreat

The US dollar reached its strongest level in two months on Wednesday as markets weighed rate hikes and Iran diplomacy. The euro eased to its weakest level since late July, while sterling bought $1.3316.

Investors are anticipating further tightening from central banks, with Federal Reserve officials flagging the possibility of more hikes if inflation does not ease. Kieran Williams, head of Asia FX at Intouch Capital Markets, said 'the dollar’s support from rates looks durable, but futures already price more tightening than the Fed's own projections, so the dollar now needs the data to confirm it.'

Oil markets remain in the spotlight with Brent crude futures slipping to $98.46 per barrel on hopes that diplomacy at the UN General Assembly could pave the way for a resolution to the seven-month-long Middle East war.