The Dollar Has Rallied Sharply

• 20.06.2025, 11:19

Against the backdrop of conflict in the Middle East.

The dollar gained momentum on Friday, June 20. Uncertainty over the escalating war in the Middle East and its potential impact on the global economy has spurred demand for safe-haven assets.

The Reuters writes that the conflict between Israel and Iran shows no signs of abating and market participants are nervous about the U.S. possibly joining the war, which has caused the dollar to surge.

The dollar index, which measures the U.S. currency against six other key rivals including the Swiss franc, the Japanese yen and the euro, may rise 0.45% this week.

The recent jump in oil prices has added a new level of inflationary uncertainty for central banks across regions that are grappling with the potential impact of U.S. duties.

The drop in oil prices has supported currencies of oil-importing countries such as the euro and the yen. The euro strengthened 0.24% to $1.1527, while the yen rose 0.1% to 145.35 per dollar. The yen's rise was also helped by better-than-expected inflation data, which supported expectations of further interest rate hikes.

The Australian and New Zealand dollars rose 0.1%, while the pound sterling climbed 0.2% to $1.349.

Although the U.S. Federal Reserve (Fed) reiterated its forecast of two interest rate cuts this year, Chairman Jerome Powell cautioned against giving the forecast too much weight. The central bank's statement further bolstered the dollar's gains.

Investors were puzzled by an unexpected 25 basis point interest rate cut by Norges Bank, however, and the krone fell more than 1 percent against the dollar.

Although most market attention this week has focused on geopolitical tensions, concerns about duties and their possible impact on costs, corporate margins and overall growth remain relevant. Those concerns have put pressure on the dollar, which is down about 9% so far this year.