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Dollar firms as oil climbs, bond rout saps risk appetite
Oil surge and global bond selloff drive dollar bids against most majors. Yen weakness near intervention zone keeps intervention risk live for traders this week.
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The dollar strengthened against most major currencies on Monday as rising Middle East tensions in the Middle East pushed oil prices higher and a global bond selloff cut risk appetite. The move marks a return of the risk-off dollar bid that had faded in recent weeks, with the yen remaining the notable exception as yen weakness kept traders watching for Japanese intervention.
Dollar Bid on Deteriorating Risk Sentiment
The dollar gained the most against commodity-linked currencies and emerging-market units Monday. The combination of a geopolitical risk premium in oil and a synchronous bond selloff across developed markets drove a classic risk-off reaction where the dollar attracts safe-haven flows despite the U.S. also being an oil consumer.
The simple read is that higher oil prices and rising yields create uncertainty. The better market read goes through positioning and liquidity. The dollar was heavily short against the euro and pound going into the week. That positioning now faces a squeeze as higher energy costs threaten to slow global growth and hit the commodity bloc hardest. The U.S. dollar index has room to retest recent highs if the bond selloff deepens and oil stays above key technical levels.
Oil Spike Meets Bond Rout
Oil prices climbed on fresh geopolitical triggers out of the Middle East. While the exact catalyst is not specified in Monday’s session summary, the mechanism is clear. Higher oil prices feed directly into inflation expectations, which harden the case for central banks to keep rates higher for longer. That repricing hits bonds first, with long-end yields rising across the curve.