The US dollar remained close to an 18-month high on Monday, October 12, as increased tensions in the Middle East boosted demand for safe-haven assets. Investors also turned their attention to upcoming US inflation data.
According to Reuters, the dollar index, which tracks the US currency against six major currencies, slipped slightly to 102.16. Rising geopolitical risks, volatile oil prices and uncertainty over monetary policy continued to influence currency markets.
Developments in the Middle East remained a key driver of market sentiment. Yemen’s Iran-backed Houthi group intensified attacks on Saudi Arabia. The incidents heightened concerns about energy supplies and the risk of further regional escalation.
Brent crude futures fell 0.5% to around USD 104 per barrel on Monday. However, prices remained nearly 45% above their levels before the conflict began. Oil market volatility has added to inflation concerns and increased uncertainty about the global economic outlook.
Investor positioning also reflected this shift. Data from the US markets regulator showed that bullish dollar positions rose to around USD 36 billion in the week ended October 7, compared with USD 8.4 billion three weeks earlier.
Investors are now awaiting the US consumer price index (CPI) report due on Wednesday. According to the CME FedWatch tool, Markets were pricing in an 81% probability of the Fed holding rates steady, up from 51% a month earlier. A stronger-than-expected inflation reading could revive expectations of further rate increases in December or January. Softer data, by contrast, could reduce pressure on policymakers to tighten monetary policy.
The euro traded around USD 1.12 after recording five consecutive weeks of losses. Concerns over France’s fiscal position and political uncertainty ahead of its 2027 presidential election weighed on the currency.
The dollar remained broadly steady against the Japanese yen at around 158.41 yen in holiday-thinned trading, while the British pound edged up 0.1% to USD 1.3244. Looking ahead, global bond markets continue to face heavy selling in recent weeks.
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