FX.co ★ Dollar Index Holds Near 100

The dollar index hovered near 100 on Monday, edging back from the ten-month highs hit last week, as traders weighed the ongoing conflict with Iran and its implications for inflation and the US fiscal outlook. Oil prices retreated after Treasury Secretary Bessent said Washington is allowing Iranian oil tankers to pass through the Strait of Hormuz, while President Trump has called on other countries to help keep the vital shipping route open. Even so, uncertainty remains over the timing of any resolution to the conflict. US officials say they are in talks with Iran, but Tehran has denied seeking a truce.

Attention now turns to the Federal Reserve, which will announce its monetary policy decision later this week. The federal funds rate is widely expected to remain unchanged, but investors will scrutinize policymakers’ assessment of the recent surge in energy prices and its implications for inflation and borrowing costs. Futures markets currently imply just one 25 bps rate cut, likely not before December. The greenback traded mostly lower against the Australian dollar.