Safe-haven demand supports the USD as US-Iran tensions escalate, offsetting fading Fed rate hike expectations.
The US Dollar Index (DXY) climbed slightly to around 99.60 in Asian trading, recovering from three consecutive days of losses. The move reflects modest safe-haven demand amid heightened geopolitical risks, particularly tensions between the US and Iran over naval blockades and territorial claims in critical waterways.
Market expectations for a Federal Reserve rate hike next month have softened after weaker-than-expected US jobs data and subdued inflation figures. The probability of a 25bps increase at the upcoming meeting has fallen to 35%, down from 47% a month ago, according to the CME FedWatch Tool.
Analysts note the USD remains under pressure as hawkish Fed sentiment wanes, though geopolitical uncertainties provide temporary support.