Inflation Risks Strengthen US Dollar Again
Newsmaker.id - The US dollar strengthened against most major currencies on Monday (July 13th) after new attacks in the Middle East and claims of the closure of the Strait of Hormuz increased demand for safe haven assets. The dollar rose 0.1% against the yen to 161.92, while the dollar index held around 101.07.
The euro weakened 0.1% to US$1.1403, while the pound sterling fell 0.1% to US$1.3383. The Australian dollar and New Zealand dollar also weakened by around 0.1% each as investors reduced exposure to currencies sensitive to global risk sentiment.
The dollar strengthened after the United States and Iran exchanged missile and drone attacks. Iran later declared the Strait of Hormuz closed, pushing Brent oil prices up by around 3.3% to US$78.49 per barrel. The surge in energy prices has raised concerns that global inflation will rise again and force central banks to maintain tight monetary policy.
The market now rates a 52.1% chance that the Federal Reserve will raise interest rates at least twice by its December meeting, up from 47.6% last Friday. Investors are now awaiting US CPI and PPI inflation data and testimony from Fed Chairman Kevin Warsh for clues on the next interest rate direction.
Market Impact
US Dollar: Potential to remain strong if oil prices rise, the conflict escalates, and expectations of a Fed rate hike intensify.
Euro and pound: At risk of weakening due to a stronger dollar and concerns that rising energy prices will weigh on economic growth in Europe and the UK.
Japanese Yen: Remains vulnerable to weakening due to Japan's heavy reliance on energy imports, although the yen's status as a safe haven asset could limit the pressure.
Gold: Potentially pressured by a stronger dollar and rising yields, although an escalation in the conflict could boost demand for safe haven assets.
Stock Market: Global markets are at risk of pressure due to a combination of rising energy prices, inflation, and the possibility of prolonged high interest rates. (CP)
