Key facts
- The dollar index traded near 100.78 amid cautious investor sentiment due to escalating US-Iran conflict.
- Iran's Revolutionary Guards claimed to have targeted U.S. military assets following U.S. bombardment.
- Brent crude futures saw a slight increase, trading above $88 a barrel.
- The British pound fell after new Prime Minister Andy Burnham took office.
- China maintained its benchmark lending rates, leading to a slight weakening of the dollar against the yuan.
- Markets widely expect the Federal Reserve to hold interest rates steady at its upcoming meeting.
The dollar traded with little change on Monday as investors remained cautious due to escalating tensions between the United States and Iran, which have disrupted energy supplies and raised concerns about global inflation. The dollar index, measuring its strength against a basket of six major currencies, was steady at 100.78.
Iran's Revolutionary Guards announced they had targeted U.S. military assets across the Middle East following a night of U.S. bombardment on Iranian cities. Analysts suggest that markets have largely priced in the current risks, leading to subdued volatility unless unexpected events occur.
Brent crude futures saw a slight increase, trading just above $88 a barrel after surpassing $90 earlier in the day. The euro was also broadly steady against the dollar at $1.1432.
The British pound, however, fell after new British Prime Minister Andy Burnham took office. Traders are particularly focused on the choice for finance minister, given the UK's challenging fiscal situation. Reports suggesting a centrist candidate for the role had previously supported UK assets.
In other currency markets, the U.S. dollar weakened slightly against the Chinese yuan in offshore trade, falling 0.14% to 6.7688, after China's central bank kept its benchmark lending rates unchanged. The dollar remained flat against the Japanese yen at 162.39 in thin trading conditions.
Looking ahead, markets are pricing in a high probability that the Federal Reserve will maintain its current interest rates at its upcoming meeting. Some policymakers have indicated that further rate hikes may be necessary to combat persistent inflation, setting the stage for a potentially contentious debate at the Fed's next policy meeting.