On Wednesday, August 12, 2026, the US dollar edged higher, supported by escalating tensions in the Gulf region and investor focus on forthcoming US economic data that could influence Federal Reserve policy.

Oil prices increased following separate attacks on shipping reported by the United States and Yemen's Iran-aligned Houthis on Tuesday. Tehran warned that the Strait of Hormuz would remain closed unless Washington agrees to its conditions. These developments have heightened concerns about the economic impact of an energy shock stemming from the Iran conflict, prompting investors to seek the safe-haven dollar.

Despite soft US jobs data released on the preceding Friday, analysts noted it did not significantly weaken the dollar, as markets anticipate inflation to be the key driver of the Federal Reserve's next interest rate decision. Austan Goolsbee, President of the Federal Reserve Bank of Chicago, expressed greater concern about persistently high inflation than labor market softness.

Economists expect upcoming data to show a rise in inflation last month after a decline in June, which had been influenced by falling oil prices amid hopes for an Iran peace deal. Chris Turner, global head of markets at ING, commented, "Consensus is looking for a reasonably subdued set of numbers." He added that a soft inflation report could reduce the market's expectation of a September rate hike from a 50 percent probability to favoring no change.

According to the CME Group's FedWatch tool, futures imply a 50 percent chance that the Federal Reserve will maintain current rates at its two-day meeting ending September 16, 2026.

In currency markets, the New Zealand dollar weakened by 0.25 percent to $0.5867 after Prime Minister Christopher Luxon won a confidence vote among ruling party lawmakers, dispelling recent leadership speculation ahead of the general election.

Sources