Key facts
- The dollar strengthened as renewed hostilities in the Middle East pushed oil prices higher.
- Brent crude futures rose 0.92% to $95.52 a barrel and WTI crude was 0.89% firmer at $91.02.
- The dollar index was at 99.67.
- Money markets have reinforced expectations of a Federal Reserve rate hike.
- Markets are pricing in a 67% chance of a September Fed hike.
- Fed Governor Michael Barr stated that if inflation does not cool quickly, the U.S. central bank may need to increase interest rates.
- The yield on benchmark U.S. 10-year notes edged higher to 4.8%.
The U.S. dollar held firm as renewed hostilities in the Middle East pushed oil prices higher, reviving inflation concerns. The currency's safe-haven appeal was reinforced by rising Treasury yields and growing expectations of a Federal Reserve rate hike, despite recent economic data coming in below forecasts. The U.S. launched airstrikes on Iran, prompting Iranian retaliation, which led to oil prices rising nearly 1% in early trade. The dollar index, measuring the greenback against a basket of currencies, was at 99.67. Although July JOLTS job openings and the August ISM manufacturing index were below market forecasts, money markets have reinforced expectations of a Federal Reserve rate hike following Fed Chair Kevin Warsh's speech at Jackson Hole. Markets are now pricing in a 67% chance of a September Fed hike. Fed Governor Michael Barr stated that if inflation does not cool quickly, it will be time for the U.S. central bank to increase interest rates. The yield on benchmark U.S. 10-year notes edged higher to 4.8%, while Japan's benchmark 10-year yield was at 3%. The Japanese yen remained little changed against the greenback at 160.21 per dollar, despite expectations that the Bank of Japan will raise rates this month. U.S. Treasury Secretary Scott Bessent voiced strong support for 'decisive' monetary steps to combat yen weakness in a meeting with BOJ Governor Kazuo Ueda.