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10/06/26
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Dollar Holds Near 100 as Middle East Tensions Rise
The US Dollar Index held modest gains near 100 during Asian trading on Wednesday, supported by a sharp rise in geopolitical risk. Demand for the dollar strengthened after the United States carried out fresh strikes on Iran in response to the downing of a US helicopter gunship near the Strait of Hormuz.
Tensions in the Middle East intensified further as Iran’s Islamic Revolutionary Guard Corps said it had launched drone attacks against the US Fifth Fleet in Bahrain, as well as the Ali Al Salem base in Kuwait. It also said a US base in Jordan was targeted by missile fire. The back-and-forth strikes have raised concerns that the confrontation could spread across the region.
The prospect of a broader conflict has reinforced the dollar’s appeal as a safe-haven currency. In periods of heightened uncertainty, investors often move into assets perceived as more stable, and the greenback tends to benefit from that shift.
Attention is also turning to US consumer inflation data due later on Wednesday. The report is expected to provide fresh clues on the Federal Reserve’s policy path at a time when markets remain sensitive to interest-rate expectations. A stronger-than-expected reading would likely increase speculation that the central bank may need to keep rates elevated for longer, which would generally support the dollar.
Rate expectations have already moved higher in recent weeks. According to CME FedWatch data, traders are now pricing in a 47% probability of a quarter-point rate increase in December, up from about 14% a month earlier. That change reflects both firmer inflation concerns and a more cautious view of the policy outlook.
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