U.S. Dollar Strengthens Against Major Currencies Amid Middle East Tensions

On March 26, the U.S. dollar surged against major currencies, driven by concerns over a prolonged energy shock and heightened safe-haven demand. The escalating tensions between the U.S. and Iran have dashed hopes for a peaceful resolution, reviving fears of a protracted energy crisis.

Market Analysis

The U.S. dollar index rose 0.35% to 99.97, while the euro fell 0.3% to $1.1524 and sterling declined 0.35% to $1.3319. The dollar also strengthened against the Japanese yen by 0.22% to 159.81 yen.

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Global Economic Impact

The Federal Reserve has room to maintain steady interest rates due to a still-stable labor market, despite new U.S. jobless claims edging higher last week. Oil prices surged by 5.34% to $107.68 a barrel, as investor caution grew over the uncertain diplomatic efforts.

Central Bank Outlook

The European Central Bank (ECB) has an option to raise interest rates at its next meeting if the war in the Middle East leads to an inflation surge in the euro zone. Meanwhile, the Bank of England Deputy Governor Sarah Breeden sees less risk of second-round inflation effects from rising energy prices caused by the Iran war compared to Russia's invasion of Ukraine in 2022.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Currency Movement

Against the Chinese yuan, the U.S. dollar rose 0.29% to 6.922 yuan in offshore trading. U.S. President Donald Trump is set to meet Chinese President Xi Jinping on May 14 and 15, following a delay due to the Iran war.