United States Dollar Index Holds Losses Around 101.00 Despite Increasing Risk Aversion

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is losing ground for the second consecutive day, trading around 101.00 during the Asian session on Thursday.

The Greenback faces downward pressure as traders weigh renewed inflation concerns, triggered by surging energy costs, against a softening US economic backdrop. While markets broadly expect the Federal Reserve (Fed) to leave interest rates unchanged at its upcoming meeting, shifting policy expectations and unclear guidance from new Fed Chair Kevin Warsh have added an extra layer of uncertainty to the Dollar's long-term outlook.

However, the downside of the US Dollar could be restrained due to the safe-haven demand as Middle East tensions remained in focus. Tensions escalated sharply after US President Donald Trump threatened to strike Iranian infrastructure if Tehran targets ships transiting the Strait of Hormuz, prompting Iran to vow swift retaliation against US-linked energy assets across the region.

Iran-backed Houthi militants launched missile and drone attacks on two Saudi oil tankers in the Red Sea. The assault marks the first direct strikes on tankers in the waterway, endangering a vital alternative export route for Saudi crude and opening a dangerous new front in the conflict.