Rising oil prices and Middle East supply risks lift Fed rate hike probabilities to 35.8%, bolstering the USD.
The US Dollar Index (DXY) remains near 101.50 in early Asian trade, supported by revived expectations of a Federal Reserve rate hike. The shift follows surging oil prices amid Middle East supply disruptions, which stoke inflation concerns and reduce bets on looser monetary policy.
WTI crude trades near $90.60 after hitting a six-week high of $92.25 on Thursday. The closure of key straits has disrupted 27% of global energy supply, with no diplomatic resolution in sight. Fed rate hike odds for next week’s meeting jumped to 35.8%, up from 11.8% last week, according to CME FedWatch data.
Higher energy costs and persistent supply risks are pressuring Fed officials to maintain a hawkish stance. The USD strengthened against major currencies this week, led by gains versus the Swiss franc.