TLDR
- The US dollar index held steady near 101.14, close to a two-month high, and is on track for a 1.7% monthly gain.
- Brent crude climbed more than 3% to above $107 a barrel after Trump rejected an Iran peace deal.
- Markets now price a 65% chance of a Fed rate hike at the October 28 meeting.
- The yen strengthened to around 156.75 per dollar after Japan’s currency diplomat backed a stronger yen stance.
- The Reserve Bank of Australia is expected to raise rates to 4.60% on Tuesday.
The US dollar stayed close to a two-month high on Monday. Traders are watching a standoff between the United States and Iran that has pushed oil prices higher.
The dollar index measures the US currency against a group of other currencies. It held near 101.14 during Monday trading.
The index is set for a 1.7% gain this month. That would be its best monthly performance since June.
Oil Prices Rise After Iran Peace Deal Rejected
Brent crude futures rose more than 3% on Monday. Prices moved above $107 a barrel.
The jump came after President Donald Trump rejected a peace deal with Iran. The deal would have addressed the conflict and reopened the Strait of Hormuz.
Energy supply worries have added to inflation concerns. This has led traders to expect a more hawkish Federal Reserve going forward.
Long-term Treasury yields have also been rising. This has given extra support to the dollar.
“The greenback could overshoot in the near term if energy market tensions persist and inflation risks continue to build,” said Sim Moh Siong, FX strategist at OCBC. The bank still expects a moderate dollar rally by year-end.
The euro weakened slightly to around $1.138. It is close to a two-month low and headed for a 2% drop this month.
Sterling held closer to $1.325, near a three-month low touched last week. Bank of England Governor Andrew Bailey has warned about the possibility of a rate hike.
Fed Rate Hike Odds Build Ahead of Key Data
This week brings several major economic reports. The PCE inflation index comes out Wednesday, and non-farm payrolls follow on Friday.
Both reports are expected to support further policy tightening from the Fed. Markets currently see a 65% chance of a quarter-point rate hike at the October 28 meeting.
The Fed already raised rates at its September meeting. Strategists say fresh data this week could solidify hike expectations further.
“Data could re-emerge as a primary driver for the dollar this week,” said ING FX strategist Francesco Pesole.
China’s manufacturing data comes out Wednesday, ahead of the country’s National Day holidays. Euro zone inflation figures are due Friday.
The Japanese yen rose to about 156.75 per dollar. This followed comments from Japan’s top currency official, Atsushi Mimura, about recent statements on yen weakness.
Japan’s Finance Minister and the US Treasury Secretary said last week that both countries plan to work together on currency cooperation. Japan also reported that service-sector inflation hit its fastest annual pace in over two years in August.
That data could support the case for further rate hikes from the Bank of Japan.
The Australian dollar traded at $0.7016. The Reserve Bank of Australia is expected to raise its rate by 25 basis points to 4.60% on Tuesday, a near 15-year high.
China’s offshore yuan strengthened slightly to 6.7159 per dollar. This followed a three-day summit between Trump and Chinese President Xi Jinping that produced no major public breakthroughs.
Stop guessing and start investing with confidence. KnockoutStocks gives you the AI insights, market intelligence, and stock research you need to spot opportunities, cut through the noise, and make smarter investment decisions — all in one powerful platform.
Sign up today and get 50% OFF full access to our premium stock picks.
Simply use coupon code SPECIAL50 at checkout to claim your exclusive discount.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
