Geopolitical risks and hawkish Fed expectations push the USD Index to a near-three-month peak, strengthening the dollar against the yen.
The USD/JPY pair climbed to a two-and-a-half-week high during Monday’s Asian session, extending gains for the sixth straight day. The move reflects broad dollar strength, with the USD Index (DXY) reaching its highest level since April 7 amid rising US-Iran tensions and expectations of a hawkish Federal Reserve stance.
Recent geopolitical developments, including US warnings to Iran and reports of coordinated military preparations, have bolstered the dollar’s safe-haven appeal. Oil prices also surged to a two-week high on concerns over supply disruptions, fueling inflation fears and reinforcing bets on Fed rate hikes. Traders now price in over a 50% chance of a Fed rate increase by year-end, according to the CME Group’s FedWatch Tool.
The yen’s decline comes as markets weigh the impact of prolonged geopolitical risks and tighter monetary policy expectations in the US. The pair’s momentum above 159.00 suggests further upside potential if tensions persist.