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Dollar hits fresh 40-year high as ECB holds rates steady

Oil prices extended their run higher after new Middle East strikes, pushing the dollar index up and lifting expectations of Fed rate hikes.

Reported · Written up by our desk · Major Pairs

The U.S. dollar rose to a fresh 40-year high against the yen and strengthened versus the euro on Thursday, after the European Central Bank kept interest rates unchanged, Reuters reported. Oil prices climbed for a fifth straight day amid intensifying hostilities in the Middle East, with Brent reaching around $100 a barrel for the first time since May 26. U.S. crude jumped 6.8% to $92.75, while Brent gained 7.6% to $101.21, helping fuel renewed inflation concerns and supporting expectations that the Federal Reserve may raise rates.

The dollar index was up 0.4% to 101.47, while the euro was down 0.3% at $1.1372. Traders were also weighing the Fed outlook as energy shocks and the U.S. economy being seen as more insulated than Europe or Japan helped underpin the dollar’s recent gains.

The ECB held rates steady but signaled openness to another increase in September, citing the risk that higher energy prices could keep inflation above its 2% target. According to LSEG data, markets were pricing in a 71.0% chance of an ECB rate hike for its September meeting.

Latest closeWTI crude $87.52 ▲3.1%|Brent $94.43 ▲3.8%|Dollar index 101.12 ▼0.1%

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