The US dollar rallied to its strongest level in a week on Wednesday, with the dollar index touching 101.210 for the first time since July 2, as a new wave of US strikes against Iran and the revocation of an Iranian oil-sales licence drove a flight to safety. The greenback gained 0.2% against the yen to 162.46, its highest since early July, while the euro slipped 0.1% to $1.1405 and sterling edged 0.1% lower to $1.3351.
The New Zealand dollar meanwhile jumped 0.5% to a session high of $0.5705 after the Reserve Bank of New Zealand lifted its official cash rate by 25 basis points to 2.5%, matching forecasts. The central bank signalled that ‘some further reduction in monetary stimulus is likely to be required,’ hinting at additional tightening ahead. The Australian dollar added 0.1% to $0.6938.
Geopolitical tensions were the dominant driver. The US launched retaliatory strikes targeting Iranian air defence systems and drone launch sites after Tehran allegedly fired on three commercial vessels attempting to transit the Strait of Hormuz. The attacks and the cancellation of the oil-sales waiver sent Brent crude up 2.5% to $76.03 a barrel, while WTI rose 0.8% to near $72.60. DBS analysts noted the market was treating the incident as part of a high-stakes game for leverage during a temporary truce, not a return to full-scale war.
The yen remained under pressure after Bank of Japan board member Toichiro Asada, the sole dissenter to the central bank’s June rate hike, reiterated his cautious stance on further tightening, reinforcing expectations that the BOJ will move slowly despite the currency’s persistent weakness. The Indian rupee gained modestly, with USD/INR easing toward 95.00.
Later in the day, investors awaited the release of the Federal Reserve’s June FOMC meeting minutes for fresh clues on policy direction, which helped keep US stock index futures about 0.2% lower and major currency pairs in tight ranges.
