The dollar index hovered around 99.6 on Monday after a sharp advance in the previous session, as hawkish comments from Federal Reserve Chair Kevin Warsh prompted traders to ramp up bets on an imminent interest rate increase. In his Jackson Hole speech on Friday, Warsh cautioned that inflation is not slowing in a meaningful way and reiterated that policymakers remain determined to bring inflation back to the 2% target.
Futures markets now assign roughly a 57% probability that the Fed will raise rates by 25 basis points in September, up from about 40% a week earlier. The dollar also drew support from a surprise upward revision to the University of Michigan’s consumer sentiment index.
Investors are now focused on Friday’s August employment report for clearer signals on the trajectory of US monetary policy. Meanwhile, oil prices surged after the US military struck Iranian rocket launchers that were reportedly preparing to lay mines in the Strait of Hormuz, an escalation that bolstered safe-haven demand for the greenback.
