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Dollar rebounds as traders reduce shorts ahead of Middle East risk
Brent crude climbed back above $88 a barrel, underscoring how geopolitical risk continues to keep oil supported and could quickly lift Fed-hike expectations if Iran tensions flare.
The US dollar staged a broad rebound on Friday as investors locked in profits after Thursday’s sharp selloff and pared back bearish positions ahead of a potentially volatile weekend in the Middle East, according to Action Forex.
Action Forex said the move reflected risk management rather than a change in conviction, noting the Greenback remained the weakest major currency as markets continued to scale back expectations for another near term Federal Reserve rate hike after softer US GDP and cooling inflation data.
The outlet pointed to oil as a key signal that markets remain unconvinced the crisis is over, with Brent crude climbing back above $88 per barrel. It also cited Commonwealth Bank of Australia estimates that tanker traffic through the Strait of Hormuz has recovered to roughly 30% to 35% of pre conflict levels, while noting throughput would still be running at about one third of normal capacity if estimates hold.
Action Forex added that the geopolitical situation showed little sign of de escalation, with temporary pauses followed by missile attacks and strikes involving Saudi and Iraqi targets. It said renewed escalation tied to Iran could create a double positive shock for the dollar, combining higher oil that revives inflation and Fed tightening expectations with a risk off shift that boosts safe haven demand.
Latest closeWTI crude $86.80 ▲3.8%|Brent $90.12 ▲1.2%