Dollar steady, set for strongest monthly gain since July
The dollar was on the front foot as investors sought safety this month
The U.S. dollar held broadly steady on Monday, poised for its strongest monthly gain since July as investors fret about the ramifications of a long war in the Middle East, denting the yen past the crucial 160 level and spurring intervention jitters.
Markets have been rattled this month after the war effectively shut the Strait of Hormuz, a chokepoint for about a fifth of global oil and gas flows, driving Brent crude toward its biggest monthly rise and unsettling rate expectations.
The war, sparked by U.S. and Israeli strikes on Iran on February 28, has since spread across the Middle East.
The dollar was on the front foot as investors sought safety this month. The euro fetched $1.1512, on course for a 2.5% drop in March, its weakest monthly decline since July.
Sterling was at $1.32585, little changed on the day but set for a drop of 1.7% this month. The dollar index was at 100.14 in early trading.
The broader market focus is firmly on oil prices as Brent crude futures sit at $114.6 per barrel, up about 58% in March, its strongest monthly surge on record.
Where the USD goes from here is simply a view on oil. Where oil goes, the USD goes, said Prashan Newnaha, senior rates strategist at TD Securities.
Elevated oil prices have reignited inflation concerns, prompting U.S. rate futures to begin pricing in the risk of a central bank rate hike later this year, a sharp shift from earlier this year when traders were betting on as many as two rate cuts in 2026.
At the same time, investors are increasingly weighing the longer‑term economic toll of a prolonged war.
Central banks find themselves in the most uncomfortable of positions: facing prices that argue for tightening while growth signals argue for caution, said Marc Chandler, chief market strategist at Bannockburn Capital Markets.
He added: It is stagflation’s calling card, and it arrived before most were ready to receive it.