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Emirates News Agency reported that the dollar neared a two-week high on Tuesday amid a rally in oil prices and growing bets on a Federal Reserve rate hike later in the week. The currency gained as investors moved toward safe-haven assets while stock markets tumbled on concerns over artificial intelligence development. The dollar index climbed 0.4 percent to 99.6 its highest since early September according to Reuters market updates. Brent crude rose 3 percent to 108 dollars a barrel after a Houthi attack on Saudi Arabia and the postponement of Gulf-Iran talks a Reuters assessment found.
A jump in energy prices has added to inflation worries and lifted Treasury yields with the 10-year benchmark reaching 4.9895 percent after briefly exceeding 5 percent for the first time since October 2023. This followed stronger than expected US jobs data and a rise in consumer prices for August. Markets now assign a 93 percent probability to a Federal Reserve rate increase on Wednesday according to CME Group figures. Such a move would represent the first hike in more than three years.
Christopher Wong an FX analyst at OCBC said the combination of higher oil higher US yields and weaker risk appetite helped lift the US dollar broadly. He noted that near-term support may continue but further upside would likely require the Fed to leave the door open to more tightening. The euro dropped to a one-month low of 1.153 dollars and declined 0.4 percent while the British pound fell 0.3 percent to 1.35 dollars Reuters data shows. AI-related shares came under pressure after industry leaders warned about potential threats to humanity contributing to the risk-off mood.
The developments build on a pattern seen earlier in 2026 when the dollar benefited from US economic strength tied to artificial intelligence investments a separate Reuters report from June indicated. Speculators held net long positions in the dollar and substantial capital flowed into US equities supporting the currency. Economists expect at least one additional rate increase by the end of March reversing prior no-change forecasts. The dollar index has shown resilience despite earlier pressures from tariff policies.
OCBC analysis highlighted that the inflation pressures from energy costs have strengthened conviction for Fed action this week. The agency noted that the dollar’s advance makes greenback-priced assets more expensive for holders of other currencies. Further currency movements will hinge on the tone of the Federal Reserve statement following its meeting. Treasury yields and oil prices remain key factors influencing the dollar’s trajectory in coming sessions.
