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Dollar gains momentum on inflation fears fuelled by oil and trade turmoil

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Higher US Treasury yields supported the Dollar on Friday, keeping it close to a 40-year high against the Yen as rising oil prices and escalating global trade tensions heightened concerns over inflation.

 

Sterling remained near a three-week low, trading at $1.3310 in Asian hours after falling almost 0.5% against the strengthening Dollar in the previous session.

 

The Euro also stayed under pressure at $1.1381, finding little boost from expectations of imminent European Central Bank interest rate hikes, while the Dollar hovered near a three-week high against a basket of major currencies at 101.41, Reuters reports.

 

The Dollar's latest rally was fuelled by a jump in oil prices, with Brent crude climbing back above $100 a barrel after Yemen's Houthi rebels attacked two Saudi oil tankers in the Red Sea, widening the Middle East conflict to a second key global shipping route.

 

Meanwhile, US President Donald Trump vowed “major military punishment” against Iran and its Houthi allies, further escalating geopolitical tensions.

 

Further adding to inflation concerns, the Trump administration announced new tariffs of 10% and 12.5% on imports from 60 trading partners, accusing them of failing to adequately enforce bans on forced labour. The measures come as a temporary 10% global tariff is set to expire.

 

Fresh tensions in the Middle East and renewed trade disputes pushed US Treasury yields higher as investors priced in stronger inflation risks. The benchmark 10-year Treasury yield climbed above 4.7%, reaching its highest level in more than 18 months.

 

The 30-year Treasury yield remained comfortably above the 5% mark, while the two-year yield rose to its highest since February 2025, last trading at 4.3627%.

 

In addition, the stronger Dollar added further pressure on the Yen, leaving the Japanese currency hovering near a 40-year low at 163.80 against the US Dollar.

 

Elsewhere in the currency market, the Australian Dollar rose 0.14% to $0.6978 after dropping more than 0.4% in the previous session, while the New Zealand Dollar gained 0.1% to $0.5778, recovering slightly after an 0.8% decline on Thursday.

 

Investors are now looking ahead to a busy week of major central bank meetings, including the Federal Reserve's policy decision. Policymakers will have to navigate rising inflation pressures, even as the Fed has adopted a less explicit approach to its forward guidance.

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Ebene Cybercity,
Mauritius,
J. Balcikonio str. 9,
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Lithuania,

media contact

About

deVere Group – Foreign Exchange’s Public Relations Department deals with all areas of the media and external communications including international, national, regional, local, trade, consumer, print, broadcast, social and online. The Department aims to provide a helpful service to journalists, broadcasters and editors, amongst others, and reply to all media enquiries, including urgent enquiries out of hours, within agreed deadlines.

Contact

Our press office does not have access to client details and will not be able to assist with individual client enquiries. Please contact deVere Group – Foreign Exchange’s Head of Public Relations on [email protected] or call +44 2071220925.