MUFG’s Lee Hardman notes that the US Dollar (USD) has rebounded at the start of the week, lifting the Dollar Index (DXY) back towards its 200-day moving average near 98.500 after Friday’s low around 97.63. He links the move to renewed uncertainty over the US–Iran situation, which has also supported Brent and weighed on high beta commodity currencies.

Middle East risks support Dollar recovery

"The US dollar has staged a modest rebound at the start of this week helping to lift the dollar index back up closer to the 200-day moving average at around 98.500 after it fell to a low of 97.632 on Friday."

"The US dollar has been supported by fresh uncertainty over the Middle East conflict which has dampened recent optimism over further deescalation and the re-opening of the Strait of Hormuz."

"Tensions between the US and Iran picked up over the weekend after the US navy fired upon and boarded an Iranian-flagged cargo ship in the Gulf of Oman. It was the first seizure since the US blockade of the Strait was put in place."

"At the same time, it has been reported that Iran’s Islamic Revolutionary Guard Corps (IRGC) fired on multiple commercial vessels in the Strait as Iran reimposed “strict control” after briefly announcing on Friday that it has re-opened."

"The latest developments have cast doubt on whether further talks will take place between the US and Iran before the two-week ceasefire comes to an end tomorrow."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)