Overview:
The US dollar surged to its highest level in 19 months, rising 0.15% to 103.02 on its index against a basket of major currencies. The rally was driven by widening expectations for a Federal Reserve rate increase next month, bolstered by recent inflation data and hawkish comments from central bank officials. The Japanese yen weakened to 159.83 per dollar as Bank of Japan officials signaled an accommodative policy stance, widening the interest rate differential favourable to dollar holders.
Details:
The dollar's advance reflects diverging monetary policy paths between the Federal Reserve and other major central banks. Against the euro, the dollar gained ground as the currency fell 0.61% to 1.11 dollars, marking its lowest level since May 2025. Sterling declined 0.47% to 1.33 dollars, approaching two-week lows, while the Swiss franc weakened to 0.832 per dollar after a 0.86% advance.
Oil prices rose above 1% at settlement, with Brent crude climbing 1.39% to 92.76 dollars per barrel and West Texas Intermediate gaining 0.57% to 86.53 dollars per barrel. The increase reflected renewed supply concerns centring on Strait of Hormuz shipping risks, as hopes for US-Iran de-escalation faded. Forty-seven ships sustained attacks in the waterway and surrounding passages during October alone.
Saudi oil production rose 1.18 million barrels daily on a monthly basis to reach 9.2 million barrels per day in October, according to secondary source data cited by OPEC. The Organisation of Petroleum Exporting Countries maintained its global oil demand growth forecast for 2026 at 0.2 million barrels daily unchanged.
Outlook:
Investors are monitoring further Fed communications for confirmation of a rate decision in December, which would support continued dollar strength. Energy traders remain focused on geopolitical developments affecting Hormuz transit and any shifts in US-Iran negotiations that could ease supply concerns.