Dollar Largely Steady

The dollar index hovered around 99.8 on the first trading day of April, having risen 2.3% in March, supported by safe-haven demand amid lingering uncertainty over the trajectory of the Middle East conflict. While President Donald Trump suggested that the war could end within two to three weeks, traders remain cautious as more US troops are being deployed to the region and the Strait of Hormuz remains largely closed. Market participants are now awaiting Trump’s nationwide address on the Iran situation later in the day. The dollar was further supported by diminishing expectations of Federal Reserve rate cuts this year, as the conflict drove oil prices sharply higher, stoking inflation concerns. Meanwhile, Fed Chair Jerome Powell appeared to reassure markets, saying that long-term US inflation expectations remain grounded.

The dollar index has climbed nearly 3% this month, reaching 100 and heading for its strongest performance since July 2025. The escalating Middle East conflict, now in its fifth week, has disrupted energy markets, shaken economic outlooks, and sparked a flight to the world’s primary reserve currency. With Tehran effectively blocking the Strait of Hormuz and threatening Red Sea shipping, global energy prices have surged, bolstering the dollar as the US remains the world’s top oil producer. Adding to the currency’s strength, expectations for Federal Reserve rate cuts this year have faded amid renewed inflation concerns, despite Fed Chair Jerome Powell’s reassurance that long-term US inflation expectations remain anchored. Powell acknowledged that the central bank’s current policy stance provides flexibility to assess the economic fallout from the Iran war, but traders have grown increasingly cautious.

The dollar index held above 100 on Tuesday and was on track to gain nearly 3% this month, supported by safe-haven demand as the protracted Middle East conflict pushed oil prices higher and stoked stagflation concerns. The Iran war has now entered its fifth week with no signs of easing, while Tehran has effectively closed the Strait of Hormuz and threatened Red Sea shipping. President Donald Trump warned of strikes on Iranian energy infrastructure unless Hormuz is reopened, overshadowing earlier signals of a potential deal with Iran. Meanwhile, Federal Reserve Chair Jerome Powell said long-term US inflation expectations remain in check despite heightened Middle East uncertainties and noted that the central bank’s policy stance allows officials to assess the economic impact of the Iran war. Investors now await March’s consumer confidence index and February’s JOLTS job openings data.