Dollar holds near 101 as Hormuz attacks stoke safe-haven demand

Iran's IRGC fired missiles at commercial vessels in the Strait of Hormuz on Monday, hitting at least two ships and raising the threat level to "severe," according to CNBC.cnn+1
The attacks threaten a fragile U.S.-Iran ceasefire signed in mid-June that had allowed oil prices to retreat to near pre-war levels around $72 per barrel for Brent.reuters+1
Fed Governor Christopher Waller said Monday that inflation risks have "completely flipped" to become the Fed's chief concern, reinforcing a hawkish stance, according to Reuters.reuters+1

The US Dollar Index was trading around 100.95 on Tuesday, struggling for clear direction as safe-haven demand from renewed hostilities in the Strait of Hormuz clashed with expectations that the Federal Reserve will hold rates steady. The index has remained below the 101 level after slipping from a recent high near 101.50 earlier in the month.tradingeconomics+1

Hormuz Attacks Stoke Geopolitical Risk

Iran's Islamic Revolutionary Guard Corps fired missiles at commercial vessels transiting the Strait of Hormuz on Monday night, striking at least two ships including a Qatari-registered LNG tanker, Al-Rakiyat, which caught fire off the coast of Oman, according to the United Kingdom Maritime Trade Operations center. Reuters reported that a Saudi-flagged crude oil tanker was also damaged in the attacks. The incidents, which CNN reported expanded to three vessels on Tuesday, prompted the threat level in the strait to be raised to "severe," according to CNBC.aljazeera+3

The attacks mark a rupture of the fragile U.S.-Iran ceasefire that had been in place since mid-June, when both sides signed a memorandum of understanding to reopen the strait following months of near-total blockade during their military conflict. Oil prices, which had retreated to near pre-war levels around $72 per barrel for Brent crude in recent weeks, received a fresh bid on the renewed supply risks.aljazeera+3

Waller's Hawkish Lean Keeps Dollar Supported

Federal Reserve Governor Christopher Waller said Monday during a conference in Rome that the risks facing the Fed have "completely flipped around" over the past year, with inflation now the chief concern as the labor market stabilizes. "The labor market appears to be stabilizing in the U.S., while inflation has been surging," Waller said, according to The Wall Street Journal News Corp . His remarks reaffirmed the Fed's commitment to its 2% target and kept rate-cut expectations in check, providing a floor for the dollar.reuters+1

USD/CAD Firms for Third Straight Session

The pair extended gains to trade near 1.4210 in European hours on Tuesday, buoyed by the dollar's firmness amid the geopolitical turbulence. Yahoo Finance historical data confirmed the pair at 1.4210 as of July 7. However, the softer Fed outlook and stabilizing oil prices are capping further USD/CAD upside, with the 1.43 level representing the next resistance target.dailyforex+3

The dollar's near-term trajectory hinges on whether the Hormuz situation escalates further or diplomatic channels prevail — and whether incoming U.S. inflation data validates Waller's hawkish tilt.

Sources (30)