The US dollar is on track for its strongest week in over a year, spurred by geopolitical instability following a US strike on Iran. This event has triggered a ‘flight to safety’ response from investors, bolstering demand for the greenback. Market participants are now closely watching Friday’s jobs report (Saturday AEDT) to gauge whether the dollar’s rally can be sustained.
The Bloomberg Dollar Spot Index has risen 1.4 per cent this week. If these gains hold, it will mark the index’s best performance since November 2024. The week’s movements have partially offset previous weakness in the dollar, which was driven by policy uncertainty emanating from Washington and expectations that the Federal Reserve would soon cut interest rates.
Since the US began military actions in Iran on February 28, the price of West Texas Intermediate crude has surged by more than 17 per cent. This spike has fuelled inflationary pressures and diminished expectations for US interest rate cuts, further supporting the dollar’s appreciation.
While the dollar index remains roughly unchanged year-to-date, it is still down approximately 8 per cent since President Donald Trump’s inauguration in 2025. Gains in both the dollar and oil experienced a slight moderation on Thursday (Friday AEDT) following reports that the Trump administration is exploring measures to mitigate the surge in energy prices resulting from the conflict.
