Dollar Steadies Near One-Week High Amid War Developments

SadaNews - The US dollar held steady near its highest levels in a week during trading on Tuesday, amidst a continued cautious atmosphere in global markets that is balancing between escalating tensions in the Middle East and increasing hopes for a possible temporary truce. At the same time, fears of disruption in energy supplies have boosted demand for the US currency as one of the main safe havens.

The dollar index, which measures the performance of the US currency against a basket of six major currencies, stabilized at 100.93 points, after recording its highest level since July 15 in the previous session. Additionally, the dollar remained stable against the Japanese yen at 162.49 yen, while there was little change in the euro, which stabilized at 1.1417 dollars, and the pound sterling rose by about 0.1% to 1.3441 dollars following a commitment from the new British Prime Minister, Andy Burnham, to adhere to financial rules.

Global markets remain hostage to the developments of the conflict in the Middle East, after experiencing sharp fluctuations in oil prices in recent days, as they climbed to their highest levels in nearly six weeks before reducing gains.

This came after the announcement by the Iran-aligned Houthi group of a maritime blockade on Saudi Arabia, raising new concerns about the security of global energy supplies, coinciding with reports about Tehran receiving a proposal for a ten-day truce from regional and international mediators.

Rodrigo Catriel, Senior Currency Analyst at the National Australia Bank, stated that markets still hope for a de-escalation of tensions, but the situation remains highly volatile, noting that investors are awaiting whether the crisis will escalate or be contained.

In the United States, Treasury yields rose as investors reassessed the implications of rising oil prices on inflation, with the yield on ten-year US bonds stabilizing at 4.5938%, while the yield on thirty-year bonds remained above 5%, reflecting continued pressures on fixed income markets.

Fears related to energy have prompted a reassessment of investors' expectations regarding the trajectory of US monetary policy. According to data from CME's "FedWatch" tool, the likelihood of the Federal Reserve raising interest rates in its upcoming meeting decreased to only 17%, while the likelihood of a hike in September's meeting increased to 63%.

In Europe, a survey by the European Central Bank showed that companies expect a slowdown in the pace of selling price increases, yet the continued rise in oil prices has bolstered market expectations for a possible hike in the deposit interest rate, currently at 2.25%, during the upcoming September meeting.

Additionally, Japanese bond yields rose amid growing fears that energy pressures may transfer to inflation rates, prompting investors to anticipate the Bank of Japan meeting next week for signs regarding accelerating the pace of interest rate hikes.

In other currency markets, the New Zealand dollar increased by 0.4% to 0.5864 dollars, reaching its highest level since early June, following the release of strong inflation data that heightened expectations for further monetary tightening, while the Australian dollar recorded a slight increase to 0.7001 dollars. The Canadian dollar stabilized after recent losses, following the announcement by the US of new tariffs of 50% on a wide range of Canadian imports, a move that opened a new front in the trade dispute between the two countries.