Dollar Falls Slightly Ahead of Central Bank Meetings, Oil Above $100 Determined
The US dollar weakened slightly on Tuesday (March 17th) as investors shifted their focus to a series of central bank meetings amid uncertainty surrounding Middle East wars and the outlook for oil prices. The dollar index fell 0.14% to 99.57, after briefly touching 100.54 on Friday—its highest level since May 2025—as safe-haven flows strengthened and the euro and yen were seen as more vulnerable to new oil shocks.
Oil prices held above $100 per barrel due to supply concerns as the Strait of Hormuz remained largely closed, despite some shipping passing through in the previous session. A senior Iranian official said the new supreme leader rejected offers of de-escalation and demanded that the US and Israel first be “brought to their knees,” maintaining high geopolitical uncertainty.
Markets are now reassessing the global monetary policy response, with concerns of a return to a 2022-style environment where central banks aggressively tightened policy. The Fed is scheduled to announce its decision on Wednesday, followed by the ECB, Bank of England, and Bank of Japan on Thursday. While interest rates are expected to remain unchanged, the market will be focused on policy guidance regarding the risk of energy inflation.
Market pricing reflects a sharp shift: traders are now pricing in nearly two ECB rate hikes in 2026, reversing the pre-conflict cut odds. Expectations for Fed easing have also dwindled to around 25 basis points this year. The euro strengthened 0.27% to US$1.1535 after briefly touching US$1.1409 on Monday, its lowest since August 2025, while German investor morale plummeted in March—the biggest drop since February 2022.
In Asia, the yen weakened slightly to 158.88 per dollar, still near the psychological level of 160, despite verbal warnings from Japanese authorities. BOJ Governor Kazuo Ueda confirmed that core inflation is moving toward its 2% target and must be accompanied by wage growth, while Barclays believes the combination of higher oil prices, extended Hormuz closures, and a dovish BOJ outcome could push USD/JPY to test 160 and the 2024 intervention zone around 161. The Australian dollar strengthened 0.66% to 0.7116 after the Australian central bank raised interest rates in a tight vote.
Source: Newsmaker.id
