US Dollar Near 18-Month High Ahead of Inflation Data

The US dollar remained close to an 18-month high on Monday as escalating Middle East tensions and expectations surrounding upcoming US inflation data kept investors cautious about the Federal Reserve’s next interest rate decision.

The dollar index, which tracks the greenback against six major currencies, slipped slightly to 102.14 but stayed near last week’s peak. Trading activity remained subdued as Japanese financial markets closed for a public holiday.

Oil prices fluctuated amid renewed attacks by Yemen’s Iran-backed Houthi rebels on Saudi Arabian energy infrastructure and reports of two tanker attacks over the weekend. Meanwhile, US President Donald Trump’s announcement of an energy ceasefire between Russia and Ukraine added uncertainty to energy markets.

Brent crude futures declined 1% to $103.55 per barrel during Asian trading.

Analysts at Commonwealth Bank of Australia warned that continued Houthi attacks could support higher oil prices and strengthen the US dollar. They also expressed doubts about a diplomatic breakthrough between Washington and Tehran this week.

Investors are now awaiting Wednesday’s US Consumer Price Index (CPI) report, which could significantly influence expectations for the Federal Reserve’s late-October monetary policy meeting.

The Fed raised interest rates in September for the first time since 2023 as policymakers sought to contain inflation. According to CME FedWatch data, traders currently assign an 81% probability that rates will remain unchanged this month, compared with 51% a month earlier.

Barclays analysts suggested the dollar’s recent rally could temporarily lose momentum, particularly if softer inflation figures encourage the Fed to adopt a less restrictive tone.

Meanwhile, rising global bond yields and concerns about government debt have increased pressure on financial markets.

The euro edged higher to $1.121 after five consecutive weekly declines, weighed down by political uncertainty and fiscal concerns in France.

The British pound remained steady at $1.3245, while the dollar weakened 0.14% against the Japanese yen to 158.160.

The Australian dollar traded near $0.6988, while the New Zealand dollar held around $0.5614. The offshore Chinese yuan remained stable at 6.6927 per dollar.

Cryptocurrency markets recorded modest gains, with Bitcoin rising 0.2% to $83,788.50 and Ethereum advancing 0.15% to $2,540.08.

Investors will closely monitor inflation figures, Middle East developments, and Federal Reserve signals for the dollar’s next direction.