Dollar Under Pressure as Rate Hike Fears Meet Inflation Concerns

The US dollar has been under pressure despite rising expectations of a US interest rate hike. The currency was weighed down by concerns over mounting inflationary pressures, which could prompt central banks to tighten monetary policy.

Tensions in the Middle East have fueled these concerns, and investors are now looking at the impact on global economic policies. The dollar's struggles were also attributed to its shift in investor sentiment towards the Japanese yen, as well as worries over rising US debt and uncertainty surrounding economic policies.

The dollar index fell 0.07% to 99.09, nearing its recent low of 98.558. The euro edged up to $1.1618, while the British pound remained steady at $1.3519.

Traders now expect a 57% chance that the Federal Reserve will raise interest rates this month, following Friday's stronger-than-expected US jobs report. However, even if a rate hike occurs, it may not necessarily boost the dollar to new highs, as other major central banks are also expected to tighten their monetary policies.

Economic adviser to Japanese Prime Minister Sanae Takaichi predicted that the Bank of Japan would raise interest rates this month, contributing to the yen's gains. The Australian and New Zealand dollars rose slightly, while Bitcoin held above $80,000 as investors sought diversification away from the dollar.