SINGAPORE, March 30, 2026, 19:06 SGT
The U.S. dollar hovered close to its highest levels in 10 months on Monday, heading for its strongest monthly performance since July, as diminished expectations for a swift resolution to the Iran conflict kept investors leaning on the greenback. The dollar index, tracking the currency against major rivals, last sat at 100.19 after peaking at 100.54 earlier in the month.
This shift is hitting more than just the FX crowd. Brent crude pushed past $115 a barrel, and with the dollar strengthening, importers are feeling an extra squeeze—oil and many food staples trade in dollars, making things costlier and fueling inflation headaches just as central banks reconsider what to do with rates.
Asia finds itself exposed. Reuters points out that the region snaps up nearly 80% of oil passing through the Strait of Hormuz, leaving officials from India to the Philippines grappling with a tough trio: accept weaker currencies, hike rates, or draw down reserves. Currencies were already under pressure before this hit, Natixis’s Alicia Garcia Herrero noted. “No easy policy options,” added Nomura’s Sonal Varma. Reuters
Chris Weston at Pepperstone flagged that the “playbook is to sell rallies in risk and maintain volatility hedges.” Bob Savage at BNY described this week’s batch of U.S. labor numbers as a “crucial run” for how the dollar trades next. The Bureau of Labor Statistics is set to release the March Employment Situation report on April 3. Reuters
The yen slipped past 160 per dollar—territory many traders flag as a red line since Tokyo’s July 2024 intervention—before clawing back to around 159.65. Japan’s chief currency official, Atsushi Mimura, cautioned that “decisive” measures could be on the table if speculative pressure continues. Meanwhile, BOJ Governor Kazuo Ueda left the door open to a possible rate hike as early as next month. Reuters
The euro managed to hold around $1.15, as traders ramped up bets that the European Central Bank would step in if rising energy prices pushed up inflation across the board. Policymaker Francois Villeroy de Galhau said the ECB was “ready to act” if it came to that. Commerzbank’s Thu Lan Nguyen pointed out that these expectations of ECB intervention were putting a floor under euro/dollar levels. Reuters
Sterling slipped further versus the dollar. As for the Australian and New Zealand dollars, both are on track for sharp March declines—a sign of the pressure on currencies exposed to energy imports or risk sentiment. The pound has shed 1.67% against the greenback this month; the Aussie is off 3.8%, and the kiwi is down 4.4%.
Wall Street’s been caught off guard by the rally. Bloomberg on Friday flagged that the Bloomberg Dollar Spot Index climbed roughly 2% in March. Last week, ING’s Chris Turner said it’s “too early to expect another major leg lower in the dollar,” noting that markets remain too complacent about the possibility of an extended Gulf crisis. Bloomberg.com
Still, the trade is looking crowded. According to Barclays, dollar sentiment is approaching “max bullish” territory, so positions are getting stretched. Pakistan, meanwhile, says it’s working to arrange talks between Tehran and Washington—though whether either side actually shows up remains to be seen. A diplomatic break, or even a softer U.S. payrolls number, could jolt the greenback off these highs. Reuters
Right now, the playbook hasn’t changed much: oil’s up, inflation’s hanging around, Fed cuts look less likely, and the dollar’s holding steady. According to Reuters, traders have shifted from expecting rate cuts to seeing about a 33% chance the Fed could actually hike before year-end. Central banks spanning from Tokyo to Manila are left trying to contain the fallout, not turn things around.
