The dollar index, which tracks the currency against a basket of peers, was steady at 101.11. The dollar held largely steady on Thursday as fresh US-Iran hostilities pushed oil prices higher and reinforced demand for safe-haven assets. The dollar index, which tracks the currency against a basket of peers, was steady at 101.11.
Brent crude futures rose more than 1.3% to $95.31 a barrel after the US military announced a new round of strikes on Iran. Iran-aligned Houthi forces separately said they had targeted two Saudi oil tankers as part of a maritime blockade on Saudi Arabia, raising the prospect of further disruption to oil flows through the Red Sea.
Two-year US Treasury yields climbed to a 17-month high on Wednesday as the jump in energy prices added to inflation concerns, increasing the likelihood of further Federal Reserve rate rises.
Joseph Capurso, head of international economics and foreign exchange at Commonwealth Bank of Australia, said the key difference from the start of the conflict five months ago is inventory levels. “Lower inventories mean that the risk of oil and gas shortages increases the longer the conflict lasts, making the negative economic impact of higher energy prices more severe, which is positive for the dollar,” he wrote in a note.
The euro edged up 0.02% to $1.1412, ahead of a European Central Bank meeting later in the day. The ECB is widely expected to hold rates unchanged but leave the door open to a further increase in September as the renewed energy price surge points to persistent inflation pressure.
The Australian dollar fell 0.1% to $0.6989 and the New Zealand dollar dropped approximately 0.1% to $0.5811. Sterling last traded at $1.3373.
The yen, meanwhile, rose just 0.02% to 163.1 per dollar, giving back earlier gains after Bloomberg News reported on Wednesday that Bank of Japan officials are open to raising rates more quickly than economists expect. The currency touched 163.23 per dollar on Tuesday, its weakest since December 1986, as investors adjust to the political backdrop under Prime Minister Sanae Takaichi, whose government has struggled to dispel expectations that it will pressure the Bank of Japan to delay further rate rises. Japan’s finance minister has issued repeated verbal warnings about potential currency intervention, and Tokyo carried out yen-buying operations in April and May.
