The US dollar gained ground in early Asian trading as the dollar strengthened amid a shifting Fed rate-hike outlook, amid evolving geopolitical and economic signals.
Investors are closely watching whether tensions in the Middle East will ease, while also reassessing expectations for US monetary policy. The dollar remained steady against key currencies.
It traded near 159.41 yen, close to its strongest level since 2024. Meanwhile, the Australian dollar slipped slightly to $0.6943, and the New Zealand dollar held steady at $0.5806.
The US dollar index, which tracks the currency against six peers, rose 0.5% to 99.641, marking its biggest daily gain in a week.
Geopolitical developments continue to shape investor sentiment. Iran signalled it is reviewing a US proposal to end the conflict, but has no intention of entering negotiations immediately. This uncertainty has kept markets cautious.
Analysts noted that markets remain heavily driven by headlines, as investors weigh whether recent developments point to de-escalation or prolonged tensions.
Traders have begun scaling back expectations of a Federal Reserve rate hike. Following a spike in energy prices linked to the Strait of Hormuz disruption, markets are reassessing inflation risks.
Fed funds futures now indicate a 70.6% probability that the central bank will keep rates unchanged by December, up from 60.2% a day earlier. This shift reflects growing confidence that policymakers may adopt a wait-and-see approach.
Other major currencies showed limited movement. The euro stabilised at $1.1560 after recent declines linked to comments from the European Central Bank. The British pound held at $1.3365, supported by inflation data showing consumer prices remained at 3.0% in February.
Against the Chinese yuan, the dollar remained flat at 6.9026, as markets reacted to news of an upcoming meeting between US President Donald Trump and Chinese President Xi Jinping.
Cryptocurrencies posted modest gains during the session. Bitcoin rose 0.4% to $71,247.25, while ether increased 0.2% to $2,170.88. These movements reflect cautious optimism among investors navigating both geopolitical risks and monetary policy uncertainty.
