Dollar Surges on Rising Oil Prices, Higher Interest Rate Bets
The US dollar held firm near a two-week high on Wednesday as hostilities in the Middle East pushed oil prices higher, boosting inflation concerns and Treasury yields.
Middle East tensions drove up oil prices, with Brent futures rising 1.15% to $95.74 a barrel and U.S. West Texas Intermediate (WTI) crude 0.85% firmer at $91.05.
Analysts said the dollar's appeal as a safe haven was reinforced by rising Treasury yields and growing expectations of a Federal Reserve rate hike, even as recent economic data came in below forecasts.
The US launched airstrikes on Iran on Tuesday, prompting Iranian retaliation, in the most serious escalation in weeks. The New Zealand dollar weakened 0.8% against the greenback to $0.5844, its lowest point since August 13, despite the country's central bank raising its official cash rate by 25 basis points to 2.75%.
Markets are now pricing in a 68% chance of a September Fed hike, up from around 40% a week earlier, according to CME Group's FedWatch tool.