DXY Rises on US-Iran Tensions and Hawkish Fed Expectations

The US Dollar Index (DXY) is rising as tensions between the United States and Iran escalate, with hawkish Federal Reserve expectations and higher Treasury yields providing a strong tailwind. The DXY trades around 99.71, up roughly 0.30% on the day.

Fresh fighting between the two nations has driven some safe-haven flows toward the Greenback, with oil prices also moving higher in reaction to the latest escalation. West Texas Intermediate (WTI) climbed to its highest level since July 24 and is currently trading around $88.70 per barrel.

Higher energy prices add to inflation risks at a time when the Fed is already struggling to bring inflation sustainably back toward its 2% target. This has revived expectations of an interest rate hike as soon as this month, with traders seeing around a 65% probability that the Fed will raise borrowing costs at its September 15-16 meeting.