The dollar surged Wednesday, nearing a new high this year as investors rushed to safety amid higher oil prices and escalating tensions in the Middle East. The Bloomberg Dollar Spot Index rose as much as 0.5%, driven by Iranian attacks on vessels in the Strait of Hormuz. Nearly all Group of 10 currencies weakened against the greenback, with the euro falling to $1.12, down 0.6%. Kathleen Brooks, research director at XTB, noted the dollar is attracting safe-haven flows as other asset classes sell off. The S&P 500 Index ended its record-breaking run, while Brent crude topped $102.
Rising energy prices, France's fiscal challenges, and political risks in the region are pressuring the euro, which touched its lowest level since May 2025. Jane Foley, head of foreign-exchange strategy at Rabobank, said the dollar looks like the best option in the current environment, with traders favoring short pound positions ahead of the Oct. 28 UK budget. In Japan, the Bank of Japan may delay rate hikes for months. Market focus now turns to the Federal Reserve's September meeting minutes, which may signal further monetary tightening after last month's first rate increase in three years.
Fed officials continue to emphasize the need to tame inflation, adding to the dollar's strength. With geopolitical uncertainty and energy volatility weighing on global markets, the greenback remains the preferred refuge for investors seeking stability.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing