Renewed inflation concerns and Middle East tensions weigh on the USD as traders assess Fed policy uncertainty and energy market disruptions.
The US Dollar Index (DXY) extended losses for a second day, trading near 101.00 in Asian markets Thursday. Downward pressure stems from rising inflation fears driven by surging energy costs, alongside a weakening US economic outlook. Markets anticipate the Federal Reserve will hold rates steady at its next meeting, but shifting policy expectations and unclear guidance from new Fed Chair Kevin Warsh cloud the dollar’s trajectory.
Prior sessions saw the DXY stabilize above 101.50, but mixed signals on inflation and growth have eroded support. Geopolitical tensions in the Middle East, including threats to oil tankers in the Red Sea, may limit further declines as safe-haven demand persists. Iran-backed attacks on Saudi vessels mark a dangerous escalation, raising risks to global energy supplies.
Traders remain cautious ahead of Fed communications, balancing inflation risks against potential economic slowdown. The dollar’s near-term direction hinges on whether geopolitical risks or monetary policy uncertainty dominates sentiment.