Dollar Strengthens, Will Hormuz Trigger Inflation?
The US dollar strengthened against most major currencies after the conflict in the Middle East escalated again. The latest attacks between the United States and Iran, coupled with claims of the closure of the Strait of Hormuz, have renewed market concerns about surging energy prices and the risk of inflation.
Against the Japanese yen, the US dollar rose 0.1% to 161.92. The euro weakened 0.1% to US$1.1403, while the pound sterling fell 0.1% to US$1.3383. The Australian dollar also fell 0.1% to US$0.6942, while the New Zealand dollar weakened 0.1% to US$0.5757.
The dollar's rise came after US and Iranian forces launched renewed missile and drone attacks over the weekend. Iran reportedly targeted US facilities in several Gulf states and reiterated that the Strait of Hormuz, a vital route for global energy supplies, had been closed.
Oil prices also surged as Asian trading opened. Brent rose 3.3% to US$78.49 per barrel. This oil surge was the main driver of the dollar's strengthening as markets began to worry that higher energy prices could fuel inflation and accelerate the likelihood of a central bank interest rate hike.
Market participants are now starting to increase expectations for a Fed rate hike. Fed funds futures estimate a 52.1% chance that the Fed will raise rates two or more times by the December meeting, up from 47.6% on Friday. The US dollar index (DXY) briefly rose 0.2% to its highest level since July 8, before stabilizing around 101.07.
This week's market focus will be on US inflation data, including the CPI on Tuesday and the PPI the following day. Investors are also awaiting testimony from Fed Chairman Kevin Warsh before Congress. If inflation flares up again and Warsh sounds hawkish, the dollar could remain strong, while riskier assets and cryptocurrencies like Bitcoin and Ether could come under pressure again. (asd)*
Source: Newsmaker.id
