The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, continued to lose ground for the second consecutive day, trading around 101.00 during the Asian session on Thursday [1][2]. The DXY was reported to be 0.13% lower on the day, reflecting broad-based weakness in the Greenback, particularly against the Australian Dollar, Swiss Franc, and other major currencies [2]. The USD/CHF pair corrected to near 0.8136 after failing to extend gains beyond the yearly high of approximately 0.8152, with the Swiss Franc snapping a three-day losing streak against the US Dollar [2].
The market environment was dominated by escalating geopolitical tensions in the Middle East. US President Donald Trump threatened to strike Iranian infrastructure if Iran targeted ships transiting the Strait of Hormuz, prompting Iran to vow swift retaliation against US-linked energy assets [1][2]. Iran-backed Houthi militants launched missile and drone attacks on two Saudi oil tankers in the Red Sea, marking the first direct strikes on tankers in the waterway and threatening a vital export route for Saudi crude [1]. The US Central Command (CENTCOM) confirmed it had completed the 12th round of strikes against Iran, while Iran's Foreign Minister Abbas Araghchi warned of a 'powerful and decisive response' to any US aggression [2].
Surging energy costs and renewed inflation concerns added to the uncertainty, though US inflationary pressures were reported to have cooled in June [1][2]. Despite these inflation dynamics, markets broadly expect the Federal Reserve to leave interest rates unchanged at its upcoming meeting [1]. However, shifting policy expectations and unclear guidance from new Fed Chair Kevin Warsh have contributed to uncertainty regarding the Dollar's long-term outlook [1]. The ongoing Middle East crisis and its impact on global energy supply are seen as adding further uncertainty to the Fed's monetary policy path [2].
The safe-haven demand for the US Dollar was noted as a potential factor restraining further downside, given the heightened geopolitical risks [1]. Looking ahead, the next major trigger for the US Dollar will be the Federal Reserve's monetary policy decision [2].
CONCLUSION
The US Dollar Index remains under pressure near 101.00 amid escalating Middle East tensions and uncertainty over the Federal Reserve's policy direction. While safe-haven demand may limit further losses, the market is closely watching geopolitical developments and the Fed's upcoming decision for further cues. Overall, the environment remains volatile with high market impact.