US dollar climbed on Monday to its highest level in more than five weeks after military strikes by the United States and Israel on Iran boosted demand for safe haven assets amid growing fears of a broader Middle East conflict. Dollar Index, which measures the US currency against a basket of six major peers, advanced 0.8 percent to 98.38, marking its strongest level since late January.
Gains were driven by heightened market uncertainty after Washington signaled that strikes would continue for as long as necessary. That stance reinforced demand for the US currency as a defensive asset despite ongoing debate this year over the dollar’s global role. Oil prices also jumped following the escalation, adding fresh inflationary pressure that could limit Federal Reserve flexibility to cut interest rates in the near term, particularly as growth concerns persist alongside sticky price pressures.
Euro fell 0.9 percent to 1.1707, weighed down by expectations of rising energy costs across Europe, while sterling declined 0.5 percent to 1.3417. Swiss franc strengthened sharply as a traditional safe haven, reaching its strongest level in more than a decade against euro, fueling speculation that negative interest rates in Switzerland could return if upward pressure on the currency continues.
In Asia, dollar gained 0.7 percent against Japanese yen to 157.20 as markets assessed impact of higher energy prices on Japan’s oil imports, a development that may encourage Bank of Japan to adopt a more cautious stance toward further monetary tightening. Dollar also advanced 0.4 percent against Chinese yuan to 6.8821, while Australian dollar slipped 0.3 percent, reflecting its sensitivity to commodity and oil price movements.
Overall, geopolitical escalation reinforced demand for dollar and reaffirmed its position as primary safe haven during periods of instability, while markets closely monitor political developments and their implications for inflation and global monetary policy.
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