The U.S. dollar strengthened to near an 18-month high at the start of trading on Monday, driven by its status as a safe-haven asset amidst escalating military tensions in the Middle East. The U.S. Dollar Index rose 0.2% to 102.43 points against a basket of six major global currencies, fueled by investor concerns over fresh attacks by Yemen's Houthi group on Saudi Arabia's energy infrastructure and two commercial tankers in the Gulf.
Demand for the greenback was further confirmed by data from the U.S. Commodity Futures Trading Commission (CFTC), showing that net bullish bets on the dollar surged sharply to around $36 billion for the week ending October 7, up from just $8.4 billion three weeks prior. This capital shift occurred largely at the expense of the euro, as investors moved funds out of the Eurozone due to ongoing fiscal and political turmoil.
Global financial markets are now focused on the U.S. Consumer Price Index (CPI) report scheduled for release on Wednesday. This inflation data is critical, as it serves as the final key macroeconomic indicator before the Federal Open Market Committee (FOMC) policy meeting in October. Although U.S. consumer sentiment has slumped due to rising fuel costs, the CME FedWatch tool indicates that traders currently assign an 81% probability to the Federal Reserve keeping interest rates unchanged this month. In energy commodity markets, Brent crude oil prices hovered at a high of around $104 per barrel—slipping slightly by 0.5%—following President Donald Trump's announcement regarding a proposed energy-sector ceasefire between Russia and Ukraine. Despite this minor correction, the benchmark price remains nearly 45% higher than pre-war levels, while physical prices in the spot market have doubled, sustaining concerns about persistent global inflation.
In other major currency markets, the euro continued its decline to $1.1176 after recording losses for five consecutive weeks, weighed down by a French budget crisis that saw the yield spread between French and German 10-year bonds widen to 140 basis points. The U.S. dollar strengthened to 158.61 yen during thin trading in Tokyo, while the Indian rupee rebounded 1.1% to 95.7 against the dollar after the Reserve Bank of India (RBI) intervened by diverting oil companies' dollar-buying orders away from the spot market.
