The U.S. dollar strengthened against major global currencies on Monday as investors shifted toward safer assets following renewed tensions between the United States and Iran, while strong American economic data further supported expectations that the Federal Reserve may keep interest rates elevated for longer.
The dollar index, which tracks the greenback against six major currencies, rose 0.1 percent to 98.103 during Asian trading after gaining ground for a second consecutive session.
The euro fell 0.2 percent to $1.1757 while the Japanese yen weakened 0.3 percent to 157.155 per dollar. The British pound also slipped 0.3 percent to $1.3590 as investors moved away from risk-sensitive assets amid uncertainty surrounding the Middle East conflict.
The renewed strength of the dollar came after U.S. President Donald Trump rejected Iran’s response to a U.S.-backed peace proposal, describing the offer as “TOTALLY UNACCEPTABLE” in a post on Truth Social.
The latest development raised fears that tensions in the Gulf region could persist longer than expected, increasing concerns over disruptions to global energy supply routes, particularly through the Strait of Hormuz.
Brent crude oil surged 4.5 percent to $105.85 per barrel following the escalation, reinforcing inflation concerns and boosting demand for the dollar as a safe-haven currency.
Analysts said the greenback was also supported by stronger-than-expected U.S. labour market data released on Friday.
The latest non-farm payrolls report showed the U.S. economy added 115,000 jobs in April, nearly double market expectations.
The stronger employment figures reinforced investor expectations that the Federal Reserve could maintain current interest rates for an extended period despite recent divisions among policymakers over the outlook for rate cuts.
According to Reuters, the Federal Reserve held interest rates steady last month, although the decision exposed one of the deepest policy splits within the central bank in decades as three officials dissented against signaling future rate reductions.
Alex Loo, senior macro strategist at TD Securities in Singapore, said factors that previously weighed on the dollar have become less convincing due to resilient U.S. economic data, hawkish Federal Reserve signals and the continued geopolitical deadlock in the Middle East.
Meanwhile, investors are closely monitoring a scheduled meeting between Trump and Chinese President Xi Jinping later this week. Discussions are expected to cover Iran, Taiwan, artificial intelligence, nuclear weapons and critical minerals.
China’s offshore yuan remained relatively firm against the dollar after economic data showed producer prices rose to a 45-month high in April amid rising global energy costs.
Market analysts noted that ongoing tensions in the Gulf region continue to support demand for the U.S. dollar, particularly as higher oil prices pose greater risks to energy-importing economies in Europe and Asia than to the United States, which is now one of the world’s largest oil producers.
Currency traders are now watching developments around the Strait of Hormuz, global oil prices and upcoming central bank signals for further direction in foreign exchange markets.
