The dollar index (DXY00) recovered from a 1-week low today and is up +0.03%. The fragile and uncertain situation in the Middle East is supporting safe-haven demand for the dollar today after Iran vowed to respond to the US attacks this week on Iran’s rail and maritime infrastructure.
The dollar initially moved lower today as easing geopolitical tensions undercut crude oil prices, after an American official said that talks between the US and Iran over a permanent peace deal are continuing, with the US still committed to finding a diplomatic solution with Iran. Also, Al Jazeera reported today that Qatar said it supports all efforts to defuse US-Iran tensions. Lower crude oil prices undercut inflation expectations and could prompt the Fed to loosen monetary policy, a negative factor for the dollar.