Dollar Holds Gains on US-Iran Uncertainties

The dollar index traded just below 100 on Friday after rising for three consecutive sessions, supported by heightened uncertainties over the Middle East conflict and its effects on oil prices, inflation, and economic growth. In the latest developments, the Pentagon is reportedly looking at sending up to 10,000 additional ground troops in the Middle East to give the White House more options at the negotiating table. Meanwhile, Trump extended a deadline to attack Iranian energy infrastructure for 10 days, adding that Iran had allowed 10 oil tankers to pass through the Strait of Hormuz this week as a “present” to the US. Disruptions linked to the conflict have pushed energy prices higher, fanning inflation fears and supporting hawkish expectations on Federal Reserve policy. Markets are now pricing in a nearly 50% chance that the Fed could hike rates by December, a sharp reversal from previous expectations of two rate cuts for this year.

The dollar index edged up to 99.9 on Thursday, a third consecutive session of gains, as investors continued to assess developments in the Middle East and their implications for oil prices, inflation, and economic growth. Also, mounting doubts over a near-term end to the war with Iran weighed on sentiment, with President Donald Trump saying he would not commit to a deal to end the conflict while Tehran shows little willingness to compromise. Disruptions linked to the conflict have pushed energy prices higher, reinforcing inflation concerns and strengthening expectations that the Fed will keep interest rates steady throughout the year. On the data front, initial jobless claims edged up slightly to 210K, while continuing claims fell to a near two-year low. The greenback was mostly higher against the euro and the Australian dollar.

The dollar index held around 99.6 on Thursday after rising in the previous session, as investors continued to monitor developments in the Middle East amid heightened uncertainty over efforts to end the Iran war. The White House maintained that talks are ongoing, with the Trump administration reportedly sending a 15-point plan to Iran via Pakistan aimed at resolving the conflict. Top Iranian authorities are reviewing the US proposal but indicated no intention of holding talks with Washington. Tehran said it would reject a US ceasefire offer, instead countering with a five-point plan that would grant it control over the Strait of Hormuz. Disruptions from the conflict have pushed energy prices higher, fueling inflation concerns and reinforcing expectations that the Federal Reserve will keep interest rates steady throughout the year. Investors now turn to the latest weekly jobless claims data on Thursday for fresh signals on labor market conditions.