U.S. dollar near one-week high after high inflation reading

The U.S. dollar index was steady at 98.335, near the strongest level in a week

The U.S. dollar held near a one-week high on Wednesday as risk sentiment soured after a high inflation reading sent Treasury yields higher, and oil rose on renewed Middle East uncertainty.

The U.S. dollar index was steady at 98.335, near the strongest level in a week.

I think it’s ​a less positive risk tone, effectively. The U.S. dollar has been tracking risk sentiment ​very closely throughout the war, said Ray Attrill, head of FX strategy at ⁠National Australia Bank.

A lack of positive momentum in the equity market is also a culprit, he ​added.

The U.S. consumer price index (CPI) increased 3.8% in the 12 months through April, the biggest year-on-year rise ​since May 2023, as the oil shock triggered by the war with Iran pushed prices higher.

Meanwhile, hopes of a peace deal in the Middle East dwindled after the U.S. president said a ceasefire with Iran was “on life ​support” after Tehran rejected a U.S. proposal to end the war and stuck to a list ​of demands.

Oil prices settled higher, with Brent crude futures last traded near $108 a barrel.

The U.S. two-year ‌note ⁠yield, which typically moves in step with central bank interest rate expectations, rose to 3.9956%. The yield on benchmark U.S. 10-year notes jumped to 4.4688%.

Local markets have largely priced out any chance of a rate cut from the country’s central bank this year, while expectations for a hike of at least 25 basis ​points at the ​bank’s December meeting increased ⁠to 35%, according to CME’s FedWatch Tool.