Dollar Rebounds as Oil Rally Lifts Safe-Haven Demand Ahead of U.S. CPI

The U.S. dollar ended a two-week losing streak on Monday, with the Dollar Index rising to around 99.8 as higher oil prices and renewed Middle East tensions boosted safe-haven demand. The rebound came despite last week’s weaker U.S. payrolls report, which reduced expectations for a September Federal Reserve rate hike.

Brent crude climbed sharply after Iran ruled out direct talks with the U.S. and uncertainty persisted over the reopening of the Strait of Hormuz, reinforcing inflation concerns across global markets. Meanwhile, USD/JPY rose to around 159.3 as the Japanese yen surrendered part of the gains made following July’s joint U.S.-Japan currency intervention.

Trader outlook: Markets are now turning to Wednesday’s U.S. CPI, followed by PPI and retail sales later in the week. A softer inflation reading could renew pressure on the dollar by reinforcing expectations of a less restrictive Fed, while stronger-than-expected inflation may lift Treasury yields and extend the dollar’s recovery.