Dollar near six-week high as Fed hike expectations shift and yen weakens

The U.S. dollar held near a six-week high on Wednesday as financial markets recalibrated expectations for higher interest rates amid persistent inflation concerns linked to ongoing conflict in the Middle East. The geopolitical uncertainty has driven a global bond selloff and pushed the Japanese yen back toward levels that previously triggered official intervention.

Market sentiment has been weighed down by the unresolved conflict involving Iran, which has fueled inflation fears and sent energy prices higher. The yield on the U.S. 30-year Treasury bond recently reached its highest level since 2007. Officials have stated that the United States may need to conduct further strikes against Iran, while also suggesting Iran desires a deal to end the hostilities.

Against a basket of currencies, the dollar index was steady at 99.306, having risen more than 1% in May. This strength is attributed to safe-haven demand and shifting expectations for U.S. monetary policy. Traders now see a greater than 50% chance of an interest rate hike by the Federal Reserve in December, according to CME FedWatch data. This marks a sharp reversal from earlier expectations of two rate cuts before the outbreak...