The dollar held near a two-month high on Wednesday amid expectations of further interest rate increases in the near term, while investors remained cautious as oil prices eased on hopes of a diplomatic breakthrough to end the war in the Middle East.
The euro stood at $1.1446 in early trading, remaining near its lowest level since late July, while the British pound was at $1.3337.
The dollar index, which measures the US currency against six major currencies, was steady at 100.56.
Currency markets have focused on the recent wave of interest rate hikes and hawkish comments from major central banks, as the US-Israeli conflict with Iran has pushed oil prices higher and fueled concerns over inflation.
Investors expect further monetary tightening from central banks after Federal Reserve officials indicated that additional rate increases could be approved if inflation does not ease.
“The dollar’s rate support appears solid, but futures markets are pricing in a pace of monetary tightening that is more aggressive than the Federal Reserve’s own projections. The dollar therefore needs data to confirm this trajectory,” said Kieran Williams of Intouch Capital Markets.
Oil markets remained in focus, with Brent crude futures at $99.22 a barrel amid hopes that diplomatic efforts during the United Nations General Assembly meetings could pave the way for a settlement to the war in the Middle East.
US President Donald Trump warned on Tuesday that he could “annihilate” Iran if no agreement could be reached to end the war, while also indicating that a deal could be reached soon amid diplomatic efforts at the United Nations.
The Japanese yen stood at 157.55 per dollar as traders remained wary of possible intervention by Japanese authorities in the foreign exchange market. Markets viewed the Bank of Japan’s decision last week to raise interest rates to their highest level in 31 years as insufficiently hawkish.
