Dollar Hits New High, as Oil Surges on Hormuz Risks
The US dollar hit a new high today, while oil prices rose above US$91 per barrel after reports that three ships were hit by suspected projectiles in the Strait of Hormuz and the Persian Gulf. This development re-emphasized the oil-dollar linkage amid a market sensitive to geopolitical headlines.
The Bloomberg Dollar Spot Index fell 0.2% after the Wall Street Journal reported the IEA proposed releasing the largest emergency oil reserve in history, but rebounded 0.1% today as oil prices rose. The 10-year US Treasury yield rose 1 bps to 4.16%, with the market awaiting US inflation data due Wednesday, which is expected to show February CPI rose 2.4% (y/y).
In Europe, EUR/USD fell 0.2% to 1.1591 after previously rising to 1.1645 after Peter Kazimir said the Iran war and its impact on inflation risked forcing the ECB to raise interest rates sooner than expected. However, the euro's movement remains fragile as markets consider energy and dollar dynamics to be more dominant than changes in short-term policy expectations. EUR/CHF fell 0.3% to 0.90095 and EUR/GBP fell 0.1% to 0.8641.
In Asia-Pacific, AUD/USD strengthened by 0.9% to 0.7186, its highest level since June 2022, amid renewed RBA policy expectations. Westpac, NAB, and UBS expect the RBA to raise rates by 25 bps at next week's meeting, while Goldman Sachs views a hike on March 17 as "likely."
Options market activity also reflects the strengthening Australian interest rate theme. Several hedge funds reportedly purchased AUD/NZD call options on Tuesday following aggressive comments from RBA Deputy Governor Andrew Hauser, adding to signs that market participants are starting to build positions anticipating tighter policy.
Looking ahead, the market will be monitoring two key triggers: developments in shipping security in Hormuz, which determines the oil risk premium, and the US CPI release, which shapes the Fed's interest rate path. The combination of the two has the potential to keep volatility in the dollar and major FX pairs high in the coming sessions. (alg)
Source: Newsmaker.id
