Greenback holds steady as Middle East tensions simmer, oil rises

Published Wed, Oct 21, 2026 · 08:52 PM

THE US dollar held steady against most major currencies on Wednesday (Oct 21) as investors weighed developments in the Middle East conflict, which has revived demand for the US currency as a safe haven amid concerns about oil-driven inflation.

The euro slipped 0.1 per cent to US$1.122 and is now down almost 1 per cent in October. Traders remained cautious on the single currency as France grapples with widespread anti-government protests, and a worsening fiscal outlook that has pushed its 10-year borrowing costs to 24-year highs.

“The French debt situation isn’t tractable. They do need to go in and make proper adjustments on the fiscal side to get this debt level down, to at least show the seriousness around the trajectory,” said John Hardy, global head of macro strategy at Saxo in Copenhagen.

“It’s a concern (for the euro), but it’s not a panic by any means just yet.”

France will deploy troops alongside police and mount a major security operation ahead of further protests planned for Saturday, the government said on Tuesday, acknowledging shortcomings in its response to violence last weekend.

Sterling inched 0.1 per cent up to US$1.338. Data showed UK inflation rose more than expected in September, strengthening the case for a Bank of England rate increase in November and adding pressure on the government to support households in next week’s budget.

The pound rose 0.1 per cent against the euro, up for the fifth straight session and at its strongest level in 17 months, pinning the European common currency down at £0.8386.

The yen firmed at 157.96 per dollar. Bank of Japan deputy governor Ryozo Himino said underlying inflation was close to the central bank’s 2 per cent target and financial conditions remained loose, signalling scope for higher borrowing costs.

The dollar index, which measures the US currency against six peers, was little changed at 101.7 after declining almost 0.3 per cent on Tuesday and touching 101.50, its lowest since Oct 1.

Investors have gravitated towards the dollar this week as volatility has increased amid the US-Israeli war with Iran, with the currency also benefiting from the relative insulation provided by US energy independence.

Oil prices gained more than US$2 a barrel on Wednesday, after Iran said there was little reason to expect diplomatic progress with the US.

Iran had told Pakistan’s army chief there would be no talks with Washington until its demands were met, Iranian media outlet Nournews reported on Tuesday, adding that a Qatari delegation had arrived in Teheran. There was no official confirmation of the reports.

Despite its safe-haven appeal, the dollar has come under pressure in October from falling US Treasury yields, as investors sought the relative safety of government bonds amid volatility in artificial intelligence-related stocks ahead of major technology earnings. That reporting season got under way overnight with results from SpaceX.

“With equity market sentiment and the growth outlook closely tied to the performance of the major tech firms, their earnings results can have a large bearing on the (dollar),” said Carol Kong, economist and currency strategist at Commonwealth Bank of Australia, in a client note.

The Australian dollar climbed to a three-week high and was last up 0.4 per cent at US$0.703. Reserve Bank of Australia deputy governor Andrew Hauser told a Citi conference that the inflation outlook looked “materially worse”.

The New Zealand dollar inched 0.1 per cent up to US$0.569, while the Canadian dollar was broadly steady at C$1.404. Norway’s krone extended gains to a seventh session, up 0.4 per cent against the dollar.

Elsewhere, the Indonesian rupiah inched 0.1 per cent lower after the country’s central bank left its main interest rate unchanged for a fourth straight policy review, but hiked the deposit facility rate. REUTERS