The U.S. dollar surged on Wednesday, fueled by safe-haven demand amid escalating tensions in the Middle East. An Iranian missile attack on Israel heightened concerns in the volatile region, causing the Dollar Index to rise by 0.1% to 100.969 at 03:45 ET (07:45 GMT). This gain followed a 0.5% increase in the previous session, marking its largest rise since Sept. 25.
Safe Haven Dollar Rises
The turmoil in the Middle East intensified as Iran launched ballistic missiles on Israel, retaliating against the killing of Iran-backed Hezbollah leader Hassan Nasrallah and Israel’s deployment of ground forces into south Lebanon. The situation has raised concerns of a full-fledged conflict in the region, potentially involving the United States.
The dollar also benefited from a stronger-than-expected U.S. , contributing to a bullish short-term outlook for the currency. Market focus now shifts to the upcoming report on Friday.
Meanwhile, in Europe, the euro stabilized after a selloff, trading flat at 1.1067. The region's fell below the European Central Bank's target, prompting expectations of interest rate cuts by the ECB in the coming months.
Yen Retreats on Interest Rate Uncertainty
The Japanese yen weakened as uncertainty looms over interest rate decisions. Japan's economy minister expects careful assessments before raising rates, while the Bank of Japan's July meeting minutes revealed divided opinions on the pace of rate hikes.
In China, the yuan traded higher as markets remained closed for Golden Week celebrations, with limited activity expected until next week.
Analysis: Geopolitical tensions in the Middle East have boosted the safe-haven appeal of the U.S. dollar, while concerns over cooling inflation in the eurozone have weighed on the euro. The yen's retreat reflects uncertainty surrounding interest rate policies, with market participants closely monitoring central bank decisions. Investors should stay informed about global developments to make informed decisions regarding their portfolios.