Dollar Nears Two-Month High
The US dollar strengthened to its highest level in two months, boosted by escalating tensions in the Middle East, which triggered a surge in oil prices and US Treasury yields. The Bloomberg Dollar Spot Index rose 0.1% after surging 0.6% last Friday, before paring some of its gains. Global investors began to reconsider expectations for a Federal Reserve (Fed) interest rate hike following the latest macro data and growing inflation risks.
The yield on the 10-year US Treasury bond rose 4 basis points to 4.57%. Meanwhile, options contracts showed one-year risk reversals rising above 60 bps, indicating a preference for call positions over put positions. This trend has been stable since mid-April 2026, reflecting the dominance of dollar buying by macro and leveraged accounts.
Major currency pairs reacted mixedly. USD/JPY fell 0.3% to 159.86 as stop-loss orders were triggered, while leveraged funds increased their net short yen position to the highest level since July 2024. Meanwhile, EUR/USD weakened 0.1% to 1.1508, amid concerns that the ECB's move to maintain inflation credibility could trigger policy risk.
Analysts emphasized that investors' focus is now on US inflation data (CPI) due this week, as a benchmark for assessing the direction of the Fed's monetary policy. Rising bond yields and a strengthening dollar are expected to remain key catalysts for global currency market movements.
With geopolitical tensions remaining, the market is also watching the escalation of the Iran conflict and its potential impact on global oil flows. Surging energy prices are adding to inflationary pressures, keeping the US dollar in demand as a safe-haven, while other currencies are likely to come under pressure.
Source: Newsmaker.id
