The US dollar strengthened on the 7th following reports that Iran launched missile attacks on ships transiting the Hormuz Strait. According to US online outlet Axios citing two American officials, Iranian forces fired at least two missiles at merchant vessels passing through the strait in the evening of the 7th, causing significant damage to both ships but no casualties. The dollar gained upward pressure as the incident drove international oil prices higher, with West Texas Intermediate (WTI) crude for August delivery trading around $69 per barrel, up approximately 1% from the prior session. The Dollar Index (DXY), which measures the dollar's value against six major currencies, stood at 100.939 as of 7:57 AM Eastern Time on the 7th, up 0.075 points (0.074%) from the previous close of 100.864, according to Yonhap Infomax. The dollar's strength also reflected market concerns over potential Federal Reserve interest rate hikes, with Commonwealth Bank forex strategist Carol Kong stating the bank still expects the Federal Open Market Committee (FOMC) to begin tightening in December.
Iran Fires Missiles at Ships in Hormuz Strait
US online media outlet Axios reported on the 7th, citing two American officials, that Iranian military forces fired at least two missiles at merchant ships transiting the Hormuz Strait in the evening of the 7th. Both officials confirmed that both vessels sustained significant damage, though no casualties were reported. The attack on the strategic waterway, through which a substantial portion of global oil shipments pass, immediately impacted energy markets and currency valuations.
WTI Crude Rises to $69 per Barrel
West Texas Intermediate (WTI) crude oil for August delivery traded at approximately $69 per barrel on the 7th, representing an increase of around 1% from the previous session. The price movement came in direct response to the reported Iranian missile attacks on ships in the Hormuz Strait, as traders assessed potential supply disruption risks in the critical oil transit route.
Fed Expected to Start Tightening in December
Carol Kong, a foreign exchange strategist at Commonwealth Bank of Australia, stated on the 7th that the bank still expects the Federal Open Market Committee (FOMC) to begin tightening monetary policy starting in December. Kong noted that while markets anticipate the rate hike cycle may begin slightly earlier than the bank's forecast, the expected magnitude of increases remains smaller than their projections. Kong added that Chair Kevin Warsh does not favor providing forward guidance, estimating that tomorrow's minutes release will likely contain less information than previous records. The Dollar Index rose to an intraday high of 100.999 during London trading, following movements in US Treasury yields.
Dollar Index Gains 0.074% Against Major Currencies
The Dollar Index (DXY) reached 100.939 as of 7:57 AM Eastern Time on the 7th in New York foreign exchange markets, marking an increase of 0.075 points (0.074%) from the previous close of 100.864, according to Yonhap Infomax. The dollar-yen exchange rate stood at 161.930 yen, down 0.124 yen (0.077%) from the prior session. Japan's Minister of State for Economic and Fiscal Policy Kiuchi Minoru stated on the 7th that reports of the government encouraging low interest rates as part of fiscal expansion policy are entirely false. The currency pair continues to trade around the 162 yen level, maintaining market vigilance for potential intervention by Japanese authorities. Lee Hardman, senior foreign exchange strategist at Mitsubishi UFG, noted that while there was speculation at the end of last week that Japan might intervene to defend the yen during low trading liquidity due to the US holiday, no actual action occurred, resulting in the yen giving back some of its recent gains.
The euro-dollar exchange rate fell to 1.14300 dollars, down 0.00114 dollars (0.100%) from the previous session. Fabio Panetta, European Central Bank (ECB) Governing Council member and Bank of Italy Governor, stated on the 7th that the outlook remains fragile, with upside risks to inflation and downside risks to growth continuing to coexist. The pound-dollar exchange rate declined to 1.33867 dollars, down 0.00051 dollars (0.038%) from the prior session. The offshore dollar-yuan (CNH) exchange rate rose to 6.7970 yuan, up 0.0028 yuan (0.041%).
FAQ
What caused the US dollar to strengthen on the 7th?
The US dollar strengthened on the 7th following reports that Iran fired at least two missiles at merchant ships transiting the Hormuz Strait in the evening of the 7th, according to US outlet Axios citing two American officials. The attack drove oil prices higher and increased demand for the dollar as a safe-haven currency.
What was the Dollar Index level on the 7th?
The Dollar Index (DXY) stood at 100.939 as of 7:57 AM Eastern Time on the 7th, representing an increase of 0.075 points (0.074%) from the previous close of 100.864, according to Yonhap Infomax.
When does Commonwealth Bank expect the Fed to start raising interest rates?
Carol Kong, foreign exchange strategist at Commonwealth Bank of Australia, stated on the 7th that the bank still expects the Federal Open Market Committee (FOMC) to begin tightening monetary policy starting in December.
