Dollar rises as oil tops $110 and bond selloff saps risk appetite

The U.S. dollar edged higher on Monday, with the dollar index ticking up to 99.393 as Brent crude surged past $110 a barrel and a global bond sell‑off kept risk appetite low【2】.

Oil’s jump was sparked by a reported attack on a nuclear plant in the United Arab Emirates and stalled diplomatic efforts to end the U.S.–Israeli conflict with Iran, pushing Brent futures up more than 1%【2】. Barclays analysts said the deteriorating risk environment and bond market weakness set the stage for a continued dollar rally【2】. The firm noted that every 10% rise in oil prices typically lifts the dollar by 0.5‑1%, a dynamic now in play as oil climbs【2】.

Bond markets mirrored the risk‑off mood. Treasury yields on the benchmark 10‑year and two‑year notes hovered at 4.607% and 4.085%, respectively—levels near a one‑year peak—signalling investors’ expectation of a more hawkish Federal Reserve response【2】. Christopher Wong of OCBC warned that the dollar could stay “better bid on dips” if yields remain elevated and markets price a tougher Fed stance【2】.

Currency moves reflected the broader shift. The euro slipped to $1.1609 and the pound to $1.3305, each down over 0.1% against the greenback【2】. The Australian dollar fell 0.4% to $0.7121, while the New Zealand dollar was largely unchanged at $0.5827【2】. The yen weakened further, trading at 158.84 per dollar, reviving concerns of possible Japanese intervention【2】. The offshore yuan stood at 6.8163 per dollar ahead of Chinese data releases【2】.

Market participants will watch the Federal Open Market Committee minutes and upcoming U.S. flash PMI data for clues on inflation pressures and the Fed’s policy trajectory, which could either reinforce or reverse the dollar’s recent gains【2】.

If oil stays above $110 and bond yields remain near their recent highs, the dollar may keep its edge, but any easing of Middle‑East tensions or a shift in Fed expectations could quickly reverse the current risk‑averse stance.