Dollar posts strongest performance since July 2025 amid rising Iran tensions
The US dollar hit its highest level in nearly a year, reaching 100 on Friday and gaining 2.4% since early March, as escalating conflict in Iran prompts investors to rethink their strategies.
The dollar’s strength is driven by capital flows into safe-haven assets and expectations of further Federal Reserve interest rate hikes this year. Meanwhile, the Japanese yen weakened to 160 per dollar, pressured by rising bond yields and the prospect of rate increases by the Bank of Japan.
Commonwealth Bank of Australia currency strategist Carol Kong noted that the dollar will remain dominant on the market as long as the conflict persists.
March proved unexpectedly strong for the dollar, with the Bloomberg index rising over 2% helped by higher energy prices and flows into defensive assets. The CME FedWatch tool places the probability of a 25 basis point Fed rate hike in 2024 at 70%, reflecting a shift toward tighter monetary policy.
Consequently, current geopolitical and economic factors are sustaining demand for the dollar as a safe haven and fueling speculation about US monetary tightening.
This development may influence global currency markets and lead to further volatility, particularly if tensions in Iran escalate or central bank policies diverge.
