The US dollar held steady on Tuesday as investors awaited key US inflation data and Federal Reserve Chair Kevin Warsh’s congressional testimony, while renewed tensions in the Middle East pushed oil prices higher and raised concerns over inflationary pressures.
The dollar index, which tracks the greenback against a basket of major currencies, eased 0.04% to 101.23 as markets focused on the release of US June consumer price index (CPI) data, followed by producer price index (PPI) figures and Warsh’s first semiannual testimony before Congress.
Investor attention remained on developments surrounding the US-Iran conflict after President Donald Trump said Washington was reinstating a naval blockade on Tehran and would keep the Strait of Hormuz open following renewed missile and drone exchanges.
Oil prices climbed 2% on Tuesday to their highest level in four weeks after the announcement, extending a sharp rally from the previous session when Brent crude surged 9.6%, its biggest daily increase since May 2020.
The rise in energy prices has heightened concerns that inflation could remain elevated, potentially influencing the Federal Reserve’s interest rate path. Federal Reserve Governor Christopher Waller said rates may need to rise in the near term if data shows inflation remains above the central bank’s 2% target.
Markets are pricing in around 30 basis points of rate hikes by the US central bank this year, according to LSEG data.
The Japanese yen remained under pressure, trading around 162.38 against the dollar after briefly strengthening following comments from Japanese Finance Minister Satsuki Katayama on potential adjustments to state pension fund asset allocations.
The yen’s recent weakness has kept traders alert for possible intervention from Japanese authorities as the currency remains near 40-year lows. However, expectations of near-term support were reduced after reports indicated Tokyo had no immediate plans to alter pension fund allocations.
Elsewhere, the euro gained against the dollar to US$1.1388, while sterling rose 0.07% to US$1.3355. The Australian dollar strengthened 0.07% to US$0.6921 and the New Zealand dollar advanced nearly 0.5% to US$0.5776.
Bitcoin rose 0.49% to US$62,455.94, while ether gained 1.02% to US$1,783.63.
