The dollar traded near an 18-month peak as Asian markets opened Monday, drawing support from geopolitical tensions in the Middle East while market participants awaited US inflation figures due later in the week — data that central bank policymakers are expected to weigh in setting monetary policy.
Oil prices moved in both directions after Yemen-based Houthi forces stepped up drone and missile strikes on Saudi Arabia, with a pair of tankers also targeted over the weekend. A weekend declaration from Trump calling for an energy ceasefire between Ukraine and Russia also fed through to commodity pricing. During Asian trading hours, Brent crude futures shed roughly 1%, bringing the contract price to $103.55 a barrel.
The dollar index — a gauge of the greenback's performance against six peer currencies — traded at 102.14, sitting fractionally lower on the day yet within striking distance of the 18-month high it had touched the previous week. With Japanese markets closed for a public holiday and regional liquidity running thin, price moves stayed within a narrow band. Analysts at Commonwealth Bank of Australia noted in a written briefing that Houthi attacks on Saudi Arabian energy infrastructure were anticipated to persist, a dynamic they said could lend upward pressure to both oil prices and the US dollar.
The dollar slipped against the yen, trading at 158.160, a decline of 0.14 percent. A source noted that although Iran had acknowledged receipt of a proposal from the United States via third-party channels, those involved in the talks held out little expectation of any agreement materialising before the week was out. Trading near the unchanged mark, the Australian dollar held at US$0.6988 while its New Zealand counterpart settled at US$0.5614.
Investor attention heading into Wednesday is set to land on US consumer price index figures — a release that ranks among the final substantial economic data points before the Federal Reserve convenes its late-October interest rate deliberations. Figures released the previous week pointed to a further decline in consumer confidence among US households at the start of October, with elevated living costs tied to the Middle East conflict weighing on their economic outlook.
Policymakers pushed borrowing rates higher last month — the first such move in about two years — as part of an effort to rein in inflation, and investors have since been watching incoming data closely for any hint that a further rate change may be on the horizon. According to CME FedWatch data, derivatives markets were assigning roughly an 81% probability to the Federal Reserve leaving rates unchanged at its upcoming meeting, a figure that had climbed from around 51% just four weeks prior.
Barclays analysts indicated that the greenback's recent advance looks set to lose momentum over the coming weeks, with a modest retreat viewed as a plausible outcome. Volatility in bond markets has tightened worldwide financial conditions, a development that analysts say leaves Fed policymakers with reason to adopt a more measured tone before the October meeting — particularly should the upcoming CPI figures come in below expectations.
Bond markets endured a stretch of pronounced declines over recent weeks, pushing borrowing costs in many parts of the world to levels not seen in decades, driven by persistent concerns about inflation, energy prices, and the expansion of government debt.
The euro edged up about 0.1% to $1.121, having posted five consecutive weekly declines as concerns over France's public finances and the political backdrop ahead of the 2027 presidential vote weighed on the currency. OCBC FX strategists noted in a written commentary that it remained too early to gauge whether elevated borrowing costs would bring greater budgetary restraint from the French government, and that the euro-dollar pair was likely to trade in a range given that the pace of French fiscal and political news flow would probably ease, with any upward move in the euro likely to run into headwinds from structural pressures across the eurozone. Sterling held at $1.3245, showing little movement against the dollar.
Trading in offshore markets left the dollar holding at 6.6927 yuan against China's currency. Bitcoin added a fraction, settling at $83,788.50 after a 0.2% uptick, while ether posted a smaller 0.15% gain, bringing its price to $2,540.08.
