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Dollar set for best day in two weeks as oil rally lifts inflation fears

Brent climbed after a reported deal would bar vessels linked to the US, Israel, and other hostile countries through the Strait of Hormuz, helping push the dollar up 1.5% since the late-February Iran attack.

Reported · Written up by our desk · Major Pairs

The dollar was poised for its strongest day in more than two weeks as oil prices rose and expectations for a Middle East de-escalation cooled, according to LiveMint Markets, citing Bloomberg.

The Bloomberg Dollar Spot Index gained 0.2% on Thursday, its biggest move since July 23, after three straight sessions of declines, with Brent firming on a reported agreement that would prohibit passage of vessels associated with the US, Israel, and other hostile countries through the Strait of Hormuz.

Higher energy costs are reviving inflation concerns that could lead the Federal Reserve to consider an interest-rate hike in September, while US Treasury yields also moved higher. LiveMint Markets also pointed to the dollar’s 1.5% gain since the US attack on Iran in late February, alongside pressure on currencies of energy-importing countries such as Japan.

In FX markets, investors were also positioning for volatility ahead of Friday’s jobs report, with one-day dollar option contracts tied to Bloomberg’s dollar gauge rising to the highest level since July 30. LiveMint Markets noted that US labor productivity accelerated faster than expected in the second quarter, adding support for the greenback, while the yen weakened beyond 158 per US dollar.

Latest closeBrent $83.46

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