US dollar remains near an 18-month high amid geopolitical uncertainty

13:56

By: Azzat Manal

US dollar remains near an 18-month high amid geopolitical uncertainty

The US dollar remained close to its highest level in 18 months on Monday, supported by investor caution and demand for safe-haven assets amid geopolitical uncertainty. Although the dollar index edged down slightly to 102.16 points, it stayed near the peak recorded the previous week.

The dollar index measures the US currency’s performance against a basket of six major currencies. Movements in the index often reflect changes in investor confidence, expectations for US monetary policy and demand for assets perceived as relatively secure during periods of market volatility.

Analysts at Australia’s Commonwealth Bank said in a research note that continued attacks by Yemen’s Houthi movement on Saudi energy facilities could support higher oil prices and strengthen the dollar. Rising geopolitical risks can influence currency markets by increasing demand for safe-haven investments and raising concerns about potential disruptions to global energy supplies.

The analysts also expressed caution about the prospects for a rapid diplomatic breakthrough between Washington and Tehran. Although Iran has confirmed receiving a US peace proposal through intermediaries, they do not expect a sudden shift in the situation during the current week.

Beyond geopolitical developments, investors are turning their attention to the latest US consumer price index report, scheduled for release on Wednesday. The figures will provide an important indication of inflation trends in the world’s largest economy and could influence expectations for the Federal Reserve’s future interest-rate decisions.

The inflation report is particularly significant because it is among the major economic indicators due before the Federal Reserve’s monetary policy meeting in late October 2026. Stronger-than-expected inflation could reinforce expectations that interest rates will remain elevated, while softer data could encourage speculation about a more accommodative policy stance.

Interest-rate expectations are a key driver of currency movements because they affect the relative returns available on assets denominated in different currencies. If investors anticipate that US rates will remain higher than those in other major economies, demand for dollar-denominated assets may increase.

For now, the dollar’s strength reflects a combination of geopolitical concerns, safe-haven demand and anticipation surrounding US economic data. Investors are likely to monitor developments in the Middle East alongside the inflation figures for further indications of the currency’s direction in the days ahead.