U.S, May 20 : The U.S. dollar remained firm near a six-week high on Wednesday as investors increasingly anticipated higher American interest rates amid mounting inflation concerns linked to the ongoing Iran conflict. The geopolitical tensions have unsettled global financial markets, boosted safe haven demand for the greenback and pressured major currencies, particularly the Japanese yen.
Investor sentiment remained cautious as uncertainty surrounding the Middle East conflict continued to weigh on global markets. The prolonged tensions have triggered fears of sustained inflation, largely due to elevated oil prices and disruptions in commodity supplies. These concerns also sparked a sharp selloff in global bond markets, driving the yield on the U.S. 30-year Treasury bond to its highest level since 2007.
U.S. President Donald Trump said Washington may need to launch another strike on Iran, although he also indicated that Tehran appeared interested in negotiating a deal to end the conflict. The war has rattled investors and pushed energy prices sharply higher over recent months.
The euro traded at $1.1608 after touching its weakest level since April 8 during the previous session. The British pound stood at $1.3398, remaining close to a six-week low recorded earlier this week.
Commodity-linked currencies also came under pressure amid weakening global risk appetite. The Australian dollar slipped 0.14 percent to $0.7097, while the New Zealand dollar declined 0.24 percent to $0.5822.
Against a basket of major currencies, the U.S. dollar index held steady at 99.306. The index has risen more than one percent during May as investors moved toward safe-haven assets and adjusted expectations for possible Federal Reserve policy tightening later this year.
Market participants are now pricing in more than a 50 percent probability of a Federal Reserve interest rate hike in December, according to CME FedWatch data. This marks a sharp turnaround from earlier expectations that the U.S. central bank would deliver two rate cuts before the Iran conflict intensified.
Attention has now shifted to the minutes of the Federal Reserve’s previous policy meeting, scheduled for release later in the day. Analysts believe the document could provide further clues regarding the central bank’s inflation outlook and future policy direction.
Carol Kong, currency strategist at the Commonwealth Bank of Australia, said the Fed minutes are likely to carry a hawkish tone, potentially providing additional support to the dollar.
She noted that several Federal Reserve officials have recently expressed concerns over persistent inflationary pressures in the United States since the Fed’s April meeting.
Meanwhile, although a fragile ceasefire reached in April has largely held, markets remain uneasy because the Strait of Hormuz a critical route for global oil shipments — continues to face operational disruptions. The situation has kept energy traders on edge and sustained upward pressure on crude prices.
Brent crude futures traded at around $110.8 per barrel during early market activity, significantly above levels recorded before the conflict began in late February.
The dollar’s strength has also pushed the Japanese yen closer to the psychologically significant 160-per-dollar mark, the same level that previously prompted Japanese authorities to intervene in currency markets.
The yen was last trading at 159.03 per dollar, its weakest level since April 30. Japanese officials had intervened multiple times in late April and early May in an attempt to slow the currency’s decline, though the impact proved temporary.
Christopher Wong, currency strategist at the OCBC, said excessive volatility remains a major concern for markets, especially near the 160 to 161 range.
He warned that while intervention risks may discourage traders from aggressively pushing the dollar higher against the yen, any official action by Tokyo is unlikely to reverse the trend unless U.S. Treasury yields and overall dollar strength begin to weaken.