Dollar holds firm as Middle East hostilities drive oil prices higher

The dollar index, which measures the greenback against a basket of currencies including the yen and euro, stood at 99.67. (EPA Images pic)TOKYO: The dollar held firm on Wednesday as renewed hostilities in the Middle East pushed oil prices higher and revived inflation concerns.The currency's safe-haven appeal has been reinforced by rising Treasury yields and growing expectations of a Federal Reserve rate hike, even as recent economic data came in below forecasts.The US launched a barrage of airstrikes on Iran on Tuesday, prompting Iranian retaliation in the most serious escalation in weeks. Oil prices rose nearly 1% in early trade on Wednesday, extending the previous session's surge, with Brent futures up 0.92% at US$95.52 a barrel and US West Texas Intermediate (WTI) CLc1 0.89% firmer at US$91.02."Continued vigilance is needed over the situation in the Middle East today," said Kumiko Ishikawa, a senior FX analyst at Sony Financial Group.The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was at 99.67.July JOLTS job openings and the August ISM manufacturing index released overnight were below market forecasts, but money markets have reinforced expectations of a Federal Reserve rate hike following Fed chair Kevin Warsh's speech at Jackson Hole last week.Markets are now pricing in a 67% chance of a September Fed hike, up from around 40% a week earlier, according to CME Group's FedWatch tool."As for the US data, it is worth bearing in mind that, if the figures are weak, their impact could be offset by heightened tensions in the Middle East," Ishikawa said.August's jobs and consumer price inflation data are both due before the Fed's Sept 15 to 16 meeting.

This Friday's jobs report is expected to show that employers added 56,000 jobs last month, according to the median estimate of economists polled by Reuters.Fed governor Michael Barr said on Tuesday that if inflation does not cool quickly, it will be time for the US central bank to increase interest rates.The yield on benchmark US 10-year notes edged higher to 4.8%, while Japan's benchmark 10-year yield was at 3% Wednesday morning, after reaching the 30-year milestone on Tuesday. Higher yields drive investors to buy safe-haven currencies, including the US dollar, while undermining the case for riskier assets such as equities.The kiwi dollar was slightly s… KUALA LUMPUR: The ringgit opened lower against the US dollar on Wednesday amid higher Brent crude oil prices, which heightened inflation concerns, boosting expectations of a US Federal Reserve (Fed) rate hike, said an analyst.At 8am, the local currency eased to 4.0380/4.0445 against the greenback from Tuesday’s close of 4.0370/4.0410.Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid said the resumption of military attacks between the US and Iran, which pushed Brent crude oil prices higher, remained the main focus among traders and investors as geopolitical risks continued to take centre stage.

At the time of writing, Brent crude was up 0.78% at US$95.46 a barrel.Afzanizam said fears of higher inflation and a higher chance of a Fed rate hike had bolstered the value of the US dollar.“The US dollar index (DXY) rose 0.25% to 99.677 points as the odds of a higher US interest rate in the September Federal Open Market Committee meeting rose to 65%,” he noted.As such, he expects the ringgit to trade cautiously around 4.03 to 4.05 today.At the opening, the ringgit traded higher against a basket of major currencies.The ringgit gained vis-a-vis Japanese yen to 2.5203/2.5245 from 2.5223/2.5250 at Tuesday’s close, strengthened against the British pound to 5.4561/5.4649 from 5.4657/5.4711, and appreciated against the euro to 4.6800/4.6876 from 4.6801/4.6847.The local note traded mixed against regional currencies.It declined against the Singapore dollar to 3.1705/3.1761 from 3.1703/3.1736 on Tuesday but was slightly higher against the Indonesian rupiah at 227.5/228.0 compared with 227.5/227.8 previously.The local currency gained against the Thai baht to 12.1188/12.1438 from 12.1315/12.1483 yesterday, but remained flat against the Philippine peso at 6.47/6.48.