FX.co ★ Dollar Pares Most Gains

The dollar index was little changed at 98.1 on Monday, hovering near last week’s pre-conflict levels and surrendering most of its early gains from the Asian session. Investors remained focused on rising tensions in the Middle East and a setback in peace negotiations. On Sunday, the US reported seizing an Iranian cargo ship that allegedly attempted to breach its naval blockade, while Iran vowed retaliation, stoking fears of a renewed escalation in hostilities. Uncertainty also lingers over whether US and Iranian officials will meet before the current 14-day ceasefire expires on Tuesday, with Tehran signaling it will not participate in a second round of talks. At the same time, oil prices inched higher but stayed below recent highs. Even so, concerns about potential inflation spillovers and the possibility of further Federal Reserve rate hikes continue to underpin support for the greenback.