The U.S. dollar extended gains for a second straight session on Tuesday, driven by persistent uncertainty over the Middle East conflict and soaring crude oil prices.
Oil rose 2 percent as hopes for a deal to end the Iran war faded after former President Trump threatened to end the ceasefire, dismissing Iran’s proposal as a "piece of garbage." The greenback now hovers close to its pre-war levels.
“It appears unlikely that a breakthrough would be achieved before the Trump-Xi summit later this week,” said Mohit Kumar, an economist at Jefferies. Trump is expected in Beijing Wednesday, with Iran on the agenda.
High Oil Prices Bolster Dollar
“As long as crude oil prices stay high, because of the U.S. blockade and Iran’s threat to tanker traffic, the dollar will stay strong,” said Thierry Wizman of Macquarie Group. He added, “The toll that high oil prices will take on other economies will be much more pernicious than on the U.S.”
The dollar index rose 0.35 percent to 98.30, still near levels seen before the conflict.
Rate Outlook in Focus
Investors eye a U.S. inflation report expected to show consumer prices rose 0.6 percent in April, reinforcing the Federal Reserve’s likely hold on rates. The euro fell 0.33 percent to $1.1744.
Yen Intervention Watch
The Japanese yen jumped late in the Asian session, stoking speculation of a "rate check" - often a precursor to intervention. The dollar stood at 157.57 yen, up 0.25 percent. Japan has reportedly spent nearly $63.7 billion in recent interventions.