The dollar index climbed nearly 1% on Tuesday to rise above 99, extending Monday’s 0.8% gain and marking its highest level since mid-January. The advance was driven by escalating tensions in the Middle East and the ongoing conflict involving Iran, which have enhanced safe-haven demand for the greenback. Additional support came from investors viewing the US as a relative safe haven due to its higher degree of energy independence.
At the same time, the sharp rise in energy prices has reignited inflation concerns, leading traders to trim expectations for Federal Reserve rate cuts. Markets now anticipate the Fed’s next rate reduction in September, pushed back from earlier projections of July, though two 25-basis-point cuts are still priced in for 2026.
On the currency front, the dollar gained 1.3% against the Australian dollar, nearly 1% versus the euro, 0.8% against the pound, and 0.3% against the yen.
