Dollar Retreats Amid Hormuz Issues
The US dollar index weakened in Asian trading on Tuesday (July 14th) despite continued increased demand for safe-haven assets. The DXY, which measures the dollar's strength against six major currencies, fell to around 100.20 after strengthening for two consecutive days.
Despite the weakening, downward pressure on the dollar remained limited as tensions in the Middle East continued to escalate. US Central Command (CENTCOM) announced new precision strikes on Iranian military targets and stated that more than 50,000 US military personnel were currently deployed in the region.
Meanwhile, Iran's Revolutionary Guard Corps (IRGC) stated that two supertankers deemed violators had been disabled in the Strait of Hormuz after ignoring warnings and passing through a route reportedly rigged with mines. Iran also warned that cooperation between regional countries and the United States could delay the reopening of the waterway and trigger a global energy crisis.
Tensions in the Strait of Hormuz have pushed oil prices higher again. Markets are concerned that disruptions to this vital energy route could tighten global supplies and reignite inflationary pressures. If energy prices continue to rise, the Fed has the potential to keep interest rates high for longer or even raise them again.
Market expectations for an interest rate hike have also changed. According to the CME FedWatch Tool, the probability of the Fed raising interest rates in September is now 51%, while the probability of keeping rates unchanged is only around 23%. This could actually support the dollar, but the market is still awaiting confirmation from economic data and comments from Fed officials.
Investors' primary focus today is on June US inflation data and Fed Chairman Kevin Warsh's testimony before Congress. If core inflation remains hot and Warsh signals a hawkish tone, the dollar could strengthen again. However, if inflation data is more benign than expected, pressure on the dollar could persist, even though geopolitical risks remain high. (asd)*
Source: Newsmaker.id
