The dollar index slipped toward 100 on Monday, partially erasing last week’s gains, as reports that the US is poised to announce a coalition of countries to escort commercial vessels through the Strait of Hormuz dampened demand for the safe-haven currency. Investors are also assessing the prospects for US-Iran talks as the conflict in the Middle East enters its third week.
Oil prices held steady despite US strikes over the weekend on military targets at Iran’s main oil-export hub of Kharg Island, as well as renewed US warnings that it may target energy infrastructure if Tehran disrupts transit through the Strait of Hormuz. Even so, the dollar index remained close to its highest level in ten months, with elevated energy costs stoking inflation concerns and reducing expectations for imminent Federal Reserve rate cuts.
The Fed is widely expected to leave interest rates unchanged at its meeting this week, which would be Chair Jerome Powell’s penultimate policy gathering.
