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United States Dollar Index consolidates below 100.00 as bulls await US CPI amid Iran risks

  • DXY consolidates the previous recovery gains, awaiting a fresh catalyst before the next leg up.
  • The US-Iran standoff keeps geopolitical risk premium in play and supports the safe-haven USD.
  • Inflation fears fuel Fed hike bets, pushing US bond yields higher and also underpinning the index.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, struggles to capitalize on the previous day's positive move and oscillates in a range during the Asian session on Tuesday. The index currently trades around the 99.75 region, nearly unchanged for the day, awaiting further development surrounding the Middle East crisis and the release of the latest US inflation figures.

US President Donald Trump rejected Iran’s demand for compensation over damages caused during the war; instead, he held Iran responsible for the damage and lives lost across the region. Adding to this, Iran ruled out any future negotiations with Trump and said that it will wait until the US President’s term ends on January 20, 2029, to resume talks. Traders were quick to again price in the geopolitical risk premium, which should continue to act as a tailwind for the safe-haven US Dollar (USD).

Meanwhile, the US-Iran standoff dampens hopes for a swift reopening of the Strait of Hormuz. Furthermore, traffic through the Bab el-Mandeb Strait remains choked due to Houthis' naval blockade against Saudi Arabia, fueling supply concerns and triggering a fresh leg up in crude oil prices. This keeps inflation risks and bets for at least one interest rate hike by the US Federal Reserve (Fed) firmly on the table, which remains supportive of elevated US Treasury bond yields and favors DXY bulls.

Investors, however, refrain from placing aggressive directional bets and opt to wait for more cues about the Fed's future policy path. Hence, the focus will remain glued to US consumer inflation figures, due on Wednesday, which will be followed by the Producer Price Index (PPI) on Thursday. The crucial data, along with the incoming geopolitical headlines, will play a key role in providing some meaningful impetus to the USD and influencing the near-term trajectory.

US Dollar Price This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD0.07%-0.16%0.88%-0.12%0.10%0.17%0.25%
EUR-0.07%-0.24%0.77%-0.29%-0.02%0.00%0.09%
GBP0.16%0.24%0.97%-0.05%0.22%0.25%0.31%
JPY-0.88%-0.77%-0.97%-0.67%-0.43%-0.53%-0.40%
CAD0.12%0.29%0.05%0.67%0.25%0.15%0.42%
AUD-0.10%0.02%-0.22%0.43%-0.25%0.03%0.10%
NZD-0.17%-0.00%-0.25%0.53%-0.15%-0.03%0.07%
CHF-0.25%-0.09%-0.31%0.40%-0.42%-0.10%-0.07%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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