The dollar rose to its highest level in a week against most major currencies at the start of Asian trading on Wednesday, supported by stronger demand for safe haven assets as uncertainty increased across global markets. This also supported a rise in oil prices.
The dollar index, which measures the performance of the US currency against a basket of six major currencies, reached 101.18 points, its highest level since July 2, as investors increased their holdings of the dollar, one of the main safe haven assets during periods of market volatility.
At the same time, oil prices extended their gains, with Brent crude rising 2.6% to $76.12 per barrel at the start of Asian trading. The move was supported by market concerns over the stability of global energy supplies, bringing renewed attention to the possibility of stronger inflation pressures and higher bond yields in several markets.
Westpac analysts said the rise in uncertainty brought inflation concerns back into focus, which was reflected in higher global bond yields and stronger demand for the dollar.
In the currency market, the New Zealand dollar rose 0.1% to $0.5681 ahead of the Reserve Bank of New Zealand decision, amid expectations of an interest rate hike for the first time in more than three years.
The US dollar also gained 0.1% against the Japanese yen to 162.28 yen. Bank of Japan board member Toichiro Asada said clearer signs of demand driven inflation are needed before supporting any further interest rate increases.
In contrast, the euro fell 0.1% to $1.1405, while the British pound declined 0.1% to $1.3353. The Australian dollar was steady at $0.6926.
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