The dollar index rose as much as 0.5% to 98 on Monday before trimming gains, as investors moved into safe-haven assets amid an escalating war in the Middle East. Over the weekend, the United States and Israel launched military strikes on Iran that killed the country’s Supreme Leader, Ayatollah Ali Khamenei, and effectively shut the Strait of Hormuz. Tehran responded by attacking US assets across the region, heightening fears of a wider regional conflict.
At the same time, data released on Friday showed that US producer prices increased more than expected in January, suggesting that companies are passing higher tariff-related costs on to consumers and complicating the Federal Reserve’s path toward interest rate cuts. Even so, markets are still pricing in two 25-basis-point reductions in rates this year, amid speculation that recent financial-market turmoil could push the Fed toward a more accommodative policy stance.
