The dollar rose during trading on Thursday, benefiting from escalating geopolitical tensions in the Middle East and rising US bond yields, while the Federal Reserve's decision to hold interest rates steady left markets with questions about the direction of monetary policy in the coming period.
The dollar index, which measures the performance of the US currency against a basket of six major currencies, rose 0.2% to 101.06 points. This movement reflects the dollar's attempt to recover from earlier losses, after it fell to its lowest level since July 20 following the US Federal Reserve's decision.
US-Iranian tensions boost demand for the dollar
The dollar received additional support from escalating geopolitical tensions between the United States and Iran, after the US Central Command announced it had carried out a series of strikes targeting dozens of sites belonging to the Iranian Revolutionary Guard inside Iran, in response to an attempted missile attack targeting US forces in the Middle East.
Such developments usually prompt investors to increase their appetite for assets seen as safe havens, which provided support for the dollar in the face of the pressures it came under following the Federal Reserve's decision.
The importance of the geopolitical factor is highlighted by the fact that it provided the dollar with a source of support that was relatively independent of monetary policy, at a time when markets were trying to assess the implications of the Federal Reserve’s decision on the US currency.
Rising bond yields support the US dollar.
The US bond market also contributed to boosting the dollar's performance, with yields across various maturities rising during trading.
The yield on 10-year US Treasury bonds rose 1.7% to approximately 4.701%, while the yield on 20-year US Treasury bonds increased 1.8% to 5.249%. The yield on 30-year US Treasury bonds also rose, by 1.6%, to 5.228%.
