The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 99.70 during the Asian trading hours on Friday. The DXY trades in negative territory on the day but is poised for its second consecutive weekly gain and marks the highest levels since November 2025, bolstered by escalating geopolitical tensions in the Middle East.
The Pentagon and National Security Council (NSC) stated that they underestimated Iran’s willingness to close the Strait of Hormuz in response to US military strikes while planning the ongoing operation.
Iran’s new supreme leader, Mojtaba Khamenei, stated that the crucial Strait of Hormuz should remain closed and Tehran will continue attacks on its Persian Gulf neighbors. Ongoing hostilities in the Middle East, specifically involving the US, Israel, and Iran, could provide some support to the US Dollar against its rivals.
Expectations for the US Federal Reserve (Fed) rate cuts have been reduced as oil-driven inflation complicates the US policy path. Traders will take more cues from the US Personal Consumption Expenditures (PCE) Price Index report for January, which is due on Friday.
The headline PCE is expected to see an increase of 2.9% YoY in January, while the core PCE is projected to see a rise of 3.1% during the same period. In case of softer-than-expected inflation outcomes, this could weigh on the Greenback in the near term.
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