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Dollar edges higher as US pressure on Iran boosts safe-haven demand
The dollar index rose 0.2% on Monday, while EUR/USD slipped 0.1% after Treasury funding and oil moves tempered rate-hike expectations.
The US dollar moved higher on Monday as safe-haven demand picked up, after US Treasury Secretary Scott Bessent outlined plans to isolate Iran's economy. Yahoo Finance reports the dollar index, DXY00, gained 0.22% for the day, helped by weaker stocks and higher liquidity demand.
The report also pointed to limits on the dollar's gains, including commentary that the Treasury could use the Treasury General Account balance of $935 billion as of August 20 to fund expanded buybacks of higher-yielding, older government securities. The same day, WTI crude oil fell more than 2%, lowering inflation expectations and feeding a more dovish read on Federal Reserve policy.
In rates and policy expectations, markets were pricing a 43% probability of a 25 basis point rate hike at the next FOMC meeting on September 15 to 16, according to Yahoo Finance. EUR/USD dropped 0.14% as dollar strength weighed on the euro.
Separately, Bessent said the US will focus on five of Iran's so-called vital economic lifelines, including digital assets, technology, gold, aviation, and shipping, and warned that countries doing business with Iran could face sanctions on a defined timeline. Iran's Supreme National Security Council secretary responded by saying Iran would treat any participation or support for the US economic campaign as an act of war, and that it would not export oil through the Strait of Hormuz or the Persian Gulf.
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