FX.co ★ Dollar Hold Firm on Middle East Tensions

The dollar index hovered around 100 on Wednesday after a sharp intraday rebound in the previous session, as renewed hostilities in the Middle East cast doubt on a fragile ceasefire and the prospects for a longer-term peace agreement. The US conducted “self-defense strikes” against Iran in response to the downing of an American helicopter, while Iranian Foreign Minister Abbas Araghchi warned that Iran’s armed forces would respond to any attack or threat. Rising energy prices amid the regional conflict heightened concerns about inflation and the potential for further central bank rate hikes. Investors also awaited the latest US inflation data for fresh indications of the Federal Reserve’s policy outlook, following stronger-than-expected jobs data last week that bolstered expectations of an interest rate increase before year-end. Elsewhere, the ECB and the BOJ are widely expected to raise interest rates later this month.