The US Dollar Index (DXY) traded near 98.00 in early Asian hours on Monday. Demand rose as traders moved towards safe-haven assets during rising conflict in the Middle East.<\/p>\n
The US Dollar gained support after weekend military actions involving the US, Israel, and Iran. Aerial strikes continued, with Iranian missiles targeting Tel Aviv and Persian Gulf countries, while Israel kept striking Iran.<\/p>\n
The move followed weeks of US warnings about Iran\u2019s nuclear weapons programme. The situation also followed clashes between protesters and Iran\u2019s government.<\/p>\n
Hotter-than-expected US Producer Price Index (PPI) data also supported the Dollar. The data backed expectations that the US Federal Reserve may keep interest rates higher for longer.<\/p>\n
The DXY\u2019s gains were limited by US policy uncertainty on tariffs. On 20 February, the US Supreme Court struck down President Donald Trump\u2019s \u201creciprocal\u201d tariffs, after which he invoked Section 122 of the Trade Act of 1974 to impose a new global tariff regime.<\/p>\n
The US Dollar is the US currency and is used widely abroad alongside local notes. It accounts for over 88% of global foreign exchange turnover, or about $6.6 trillion per day, based on 2022 data.<\/p>\n
The Fed\u2019s inflation target is 2%, and it adjusts interest rates to manage inflation and employment. Quantitative easing can weaken the Dollar, while quantitative tightening tends to support it.<\/p>\n
We remember seeing the US Dollar Index push towards 98.00 in early 2025 as the Middle East conflict escalated. That initial flight to safety was the correct move, as the tensions sent Brent crude prices soaring past $110 a barrel by mid-2025, adding significant inflationary pressure globally. This sustained the dollar’s strength for much of the year.<\/p>\n
The Federal Reserve was forced to maintain its restrictive stance through 2025 because of that inflation, which kept the Greenback well-supported against the Euro and Yen. Now, the market has shifted its focus entirely to the timing of rate cuts, with CME FedWatch data currently pricing in a more than 60% chance of a cut by the fourth quarter of this year. This makes derivatives that bet on falling interest rates, such as SOFR futures, a central strategy.<\/p>\n
The global tariff regime enacted in February 2025 has also added a layer of persistent uncertainty, keeping market volatility elevated. We saw the VIX index, a measure of stock market volatility, average above 20 for much of last year, reminiscent of the market turbulence in 2022. Derivative traders should continue to use options to hedge against sudden swings caused by new trade policy announcements.<\/p>\n
Given these crosscurrents, the dollar’s immediate path is less certain than it was a year ago, as geopolitical safe-haven bids now conflict with expectations of Fed easing. In hindsight, gold was the more straightforward trade, having rallied over 15% in 2025. It benefited from both the geopolitical risk premium and, later in the year, speculation on lower interest rates.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" DXY near 98 as Middle East tensions spur safe-haven demand; hot PPI boosts higher-for-longer Fed expectations.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-50470","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/50470","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=50470"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/50470\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=50470"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=50470"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=50470"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}