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US dollar hits two-week highs as oil jumps and Fed tightening risks rise
The dollar move is supported by a 68% chance the Fed tightens in September, alongside higher Treasury yields and record-strength risk aversion tied to Middle East tensions.
The US dollar surged to two-week highs as a mix of stronger macro data, rising Treasury yields, and higher oil prices boosted demand for the greenback, Action Forex reports. The outlet links the rally to the dollar’s safe-haven appeal amid escalation in the Middle East, as well as investor preference for a yield-bearing currency and for the currency used by net energy exporters.
Action Forex points to manufacturing activity staying above the 50 threshold for eight straight months, with August’s Purchasing Managers’ Index posting its second-best reading since 2022. It also cites FOMC Governor Mark Barr, who said rates should be raised if inflation does not slow in the near term, lifting market expectations for Fed tightening.
The story also ties Brent crude’s climb to upward pressure on yields and US debt-market moves. Action Forex says investors are weighing the risk of second-round effects feeding into core inflation, with uncertainty around how long high prices and elevated Brent risk premia could persist.
On energy flows, the outlet notes the US Department of Energy estimates about 8 million barrels per day pass through the Strait of Hormuz, while an additional 4 to 5 million barrels per day are transported from Gulf states via alternative routes. It adds that higher Brent levels and prolonged elevated North Sea crude raise the risk the Fed has to tighten, reinforcing the dollar and Treasury yield gains.
Latest closeWTI crude $90.79 ▲5.9%|Brent $95.25 ▲5.3%