Greenback hits near two-month high on Fed rate hike prospects

The US dollar soared to near two-month highs on Wednesday (Sep 23), buoyed by expectations of forthcoming interest-rate hikes from the Federal Reserve. Simultaneously, the euro and British pound weakened, with the dollar index climbing 0.36 per cent to 100.92. Oil prices, which have risen 37 per cent since the escalation of the Israeli conflict with Iran, played a significant role in driving the greenback's strength.

Brent crude futures jumped 1 per cent to above US$100 a barrel, breaking a five-day decline pattern triggered by hopes of a diplomatic resolution to the Middle East war. Analysts suggest that oil prices currently hovering between US$90 and US$100 per barrel are unlikely to prompt a shift in market expectations regarding interest rates.

Meanwhile, the US dollar's strength was not solely due to inflation concerns but also the anticipation of more policy tightening from the Federal Reserve, as multiple officials have indicated. The Japanese yen slipped to 158 per US dollar, while the Japanese markets were closed for a holiday, presenting a potential opportunity for authorities to intervene in the currency market.