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US Dollar Rises Against Basket of Currencies Driven by Safe-Haven Demand

The US dollar strengthened against a basket of currencies at the start of the new week, holding near an 18-month high. It was supported by safe-haven demand as the escalating conflict in the Middle East prompted caution among investors ahead of key US inflation data due this week.

US Dollar Index Gains Ground to 102.48 Points

Around 17:15 CEST, the US Dollar Index, which tracks the dollar’s performance against a basket of six major world currencies, was up 0.3 percent at 102.48 points. The euro weakened 0.3 percent against the dollar to $1.1173. The dollar rose 0.3 percent against the yen to 158.68 JPY. The euro-yen exchange rate was virtually unchanged, trading around 177.29 JPY.

LMAX Group analyst Joel Kruger noted that renewed geopolitical uncertainty and rising oil prices are dampening investor risk appetite, triggering a fresh wave of demand for the US dollar. Market attention is now focused on Wednesday’s US consumer inflation report. This will be one of the last major economic releases ahead of the Federal Reserve’s monetary policy meeting later this month and could prove crucial in determining the dollar’s near-term trajectory.

Rising Living Costs Weigh Heavy on US Household Sentiment

Data from last week showed that US consumer confidence worsened further in early October, as rising living costs linked to the Middle East conflict weighed on households’ economic outlook.

The Fed raised interest rates last month for the first time since 2023 to curb inflation. Markets are now watching economic data to gauge whether policymakers will take another step, currently assigning an 81 percent probability that the Fed will leave rates unchanged this month. The euro continues its decline against the dollar amid investor concerns over the state of French public finances ahead of the 2027 presidential election. Last week marked the euro’s fifth consecutive weekly fall against the dollar, Reuters reported.