Dollar Surges on Renewed Gulf Tensions and Rising Oil Prices

The US dollar strengthened on August 12th as investors sought safe-haven assets due to renewed tensions in the Gulf region. The United States and Yemen's Iran-aligned Houthis reported separate attacks on shipping, with Tehran stating that the Strait of Hormuz would remain closed unless Washington accepts its conditions.

The increase in oil prices led investors to buy dollars as concerns about the economic impact of the energy shock intensified. Analysts noted that the soft US jobs data from Friday did not significantly affect the dollar's value, as markets expect inflation to drive the next Federal Reserve interest rate move.

Fed Bank of Chicago President Austan Goolsbee supported this view by stating he was more concerned about high inflation than labour market weakness. Economists anticipate that inflation data due later in the session will show an increase last month after easing in June, when oil prices fell on hopes of an Iran peace deal.

Wee Khoon Chong, macro strategist at BNY, stated 'A strong showing, particularly in core services or shelter, would likely reverse the recent repricing and result in a sharp bid, given how aggressively hike odds have fallen.' In contrast, a soft print or one that is in line with expectations would reinforce current institutional positioning bias, keeping USD scored holdings low and encouraging continued outflows.