The U.S. dollar traded near the 98.5 level on Monday, holding firm as investors balanced geopolitical risks with expectations that the Federal Reserve will maintain a cautious stance on interest rates.
The dollar index, which measures the greenback against a basket of major currencies, hovered around 98.3 to 98.5 during early trading.
The currency found support from its safe-haven appeal amid ongoing tensions in the Middle East. However, upside momentum remained capped as traders positioned for a potential pause in monetary tightening with the Federal Reserve widely expected to keep rates unchanged in the near term.
U.S. Treasury yields remained elevated with the benchmark 10-year yield holding above 4 percent, reinforcing the dollar’s relative strength.
Higher yields typically support the greenback by increasing returns on dollar-denominated assets, even as they weigh on broader risk sentiment.
Despite these supportive factors, the dollar has struggled to break significantly above the 99 level in recent sessions, suggesting that markets are pricing in a balanced outlook between inflation risks and economic moderation.
In currency markets, the euro traded around $1.07 against the dollar, showing modest resilience despite ongoing uncertainty around energy prices and economic growth in the eurozone.
The Japanese yen remained under pressure near the 159–160 range per dollar, keeping traders alert to the possibility of intervention by Japanese authorities.
Rising crude oil prices have added another layer of complexity to the outlook. Brent crude traded above $106 per barrel, raising concerns about inflation and reinforcing expectations that central banks may keep interest rates higher for longer.
Analysts said the combination of geopolitical uncertainty and oil-driven inflation risks is creating a narrow trading range for the dollar with neither bullish nor bearish factors dominating the market.
Investors are now focused on upcoming economic data releases and central bank meetings, particularly signals from the Federal Reserve, which are expected to determine the next direction for the dollar.
In the near term, the dollar is likely to remain within the 98 to 99 range with movements driven by changes in yields, geopolitical developments, and shifts in global risk sentiment.