United States Dollar Index holds below 101.00 as fading Fed hike bets counter Hormuz risks
The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, struggles for a firm near-term direction and extends its consolidative price moves for the third straight day on Tuesday. The index trades below the 101.00 mark during the Asian session and is influenced by a combination of diverging forces.
A 60-day US-Iran ceasefire is under strain amid rising tensions in the critical Strait of Hormuz, which, in turn, is seen acting as a tailwind for the safe-haven US Dollar (USD). In fact, a maritime agency reported that an oil tanker was struck by an unidentified projectile while transiting through the strait. Furthermore, Iran aims to cement strategic control over the strategic waterway and collect service fees from commercial vessels, despite strong opposition from the US.
The US-Iran standoff fuels concerns about the sustainability of the US-Iran peace deal and leads to a modest uptick in Crude Oil prices, reviving inflation fears and further supporting the Greenback. However, receding Federal Reserve (Fed) rate hike bets hold back the USD bulls from placing aggressive bets. Traders shifted expectations from one to two Fed rate increases in 2026 to between zero and one hike following the release of the soft US Nonfarm Payrolls (NFP) report for June.
Meanwhile, the US ISM Services PMI, released on Monday, eased to 54.0 in June from 54.5 in the previous month, matching consensus estimates and doing little to impress the USD bulls. This, in turn, warrants some caution before positioning for the resumption of the recent strong move up from the 97.45-97.40 support, touched in April and May. The market focus now shifts to the release of FOMC Minutes, due on Wednesday, which should provide a fresh impetus to the DXY.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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