The dollar traded around its highest in a year and a half on Monday, as an escalating Middle East conflict kept investors wary ahead of key US inflation data later this week.
That could shape the outlook for interest rates. Oil prices were volatile after Yemen’s Iran-backed Houthis stepped up strikes on Saudi Arabia, while two tankers were attacked over the weekend.
Brent crude futures were down 0.5 percent at $104 a barrel, under a touch of pressure after Sunday’s announcement from US President Donald Trump about an energy ceasefire between Ukraine and Russia.
The futures price is still nearly 45 percent above where it was before the war started, while prices on some physical markets are double those levels.
The dollar index, which tracks the US currency against six others, was slightly down at 102.16 but remained within sight of last week’s 18-month highs.
Weekly data from the US markets regulator shows investors have been adding to their bullish positions in the dollar.
The positions rose to around $36 billion in the week to October 7, from just $8.4 billion three weeks ago, largely at the expense of the euro.
“The US dollar has strengthened recently on the back of negative developments overseas that have boosted its appeal even as market participants have pared back expectations for Fed rate hikes,” MUFG currency strategist Lee Hardman said.
Wednesday’s US consumer inflation report, one of the last major economic releases before the Federal Reserve’s policy meeting this month, could be critical in determining the near-term direction of the dollar.
Data last week showed US consumer sentiment deteriorated further in early October, as the rising cost of living because of the Middle East conflict soured households’ views of the economy.