The U.S. dollar held near a two-month high on Monday as renewed gains in oil prices reinforced inflation concerns and investors looked ahead to a heavy week of economic data. The greenback remained supported by expectations that the Federal Reserve may need to tighten policy again if price pressures remain persistent.
Reuters reported the dollar index around 101.15 in Asian trading and on course for a roughly 1.7% September gain. EUR/USD and GBP/USD were both slightly lower, with the euro near $1.138 and sterling around $1.323, keeping both pairs close to multi-month lows against the dollar.
Energy prices are a central part of the current FX backdrop. Oil rose more than 1% after the United States rejected an Iranian proposal linked to reopening the Strait of Hormuz. Higher crude prices can feed through to inflation expectations, reinforcing the argument for restrictive monetary policy and supporting U.S. yields.
FXStreet separately reported EUR/USD near 1.1380, citing hawkish Federal Reserve signals and ongoing Middle East tensions. Several Fed officials have recently emphasized the risks of inflation remaining elevated, while markets continue to assess the likelihood of another rate increase at coming meetings.
The dollar’s next direction will depend heavily on incoming U.S. inflation, labor and activity data as well as changes in oil prices and Treasury yields. For EUR/USD and GBP/USD, the relative policy outlook between the Fed, European Central Bank and Bank of England remains an important driver alongside geopolitical risk.