Dollar rises to six-week high

The US dollar hit a six-week high on Wednesday as investors came to terms with the possible need ‌for higher interest rates to tackle inflation resulting from the Iran war.

The uncertainty over when the conflict may end has fanned inflation fears and triggered a global bond selloff, with the yield on the US 30-year Treasury bond hitting its highest level since 2007.

The dollar index , which tracks the currency against six peers, rose 0.1 percent to its highest since April 7 at 99.47. The index is up more than 1.3 percent in May due to safe-haven demand and markets pricing ​in chances of the Federal Reserve hiking interest rates by the end of the year.

The euro fell to a six-week low of $1.158, down ​0.16 percent. The British pound slipped 0.07 percent to $1.338, not far from a six-week low it touched earlier this week.

The Australian dollar , often seen as a barometer for risk sentiment, was little changed at $0.711, after dropping 0.9 percent on Tuesday.

Traders are now pricing in a more than 50 percent chance of a Fed rate hike by December, ​CME FedWatch showed, in a sharp reversal from two cuts expected before the war. Investor focus will be on the minutes of the ​Fed’s last meeting due later.

Analysts said the rise in US bond yields had been the key driver of the dollar.

“There is scope for yields to ‌move further higher,” said Derek Halpenny, a senior currency analyst at MUFG.

“While we maintain that the Fed will ultimately hike by less than many other G10 central banks, market pricing remains relatively low at this juncture – especially with the risks of a further jump in crude oil prices building.”

Brent crude futures were down 1.1 percent to $110 per barrel, but remained more than 50 percent higher than in late February before the war began.