US dollar retreats after four-day rally; middle east tensions sustain demand

22 July 2026

Market comment on behalf of Bas Kooijman is the CEO and Asset Manager of DHF Capital S.A

The US dollar retreated slightly on Wednesday, pausing after four consecutive sessions of gains that had driven the currency to a one-week high. The pullback could prove limited, however, as Treasury yields remain at elevated levels and geopolitical tensions could continue to fuel safe-haven demand.

Rising oil prices amid the threat of disruptions to shipping through the Red Sea and ongoing maritime incidents in Hormuz have revived inflation concerns, reinforcing expectations that the Federal Reserve will need to keep interest rates higher for longer, underpinning Treasury yields and the dollar. The Fed is expected to raise interest rates this year and the next.

Looking ahead, traders will keep a close watch on geopolitical developments in the Middle East and how any further escalation feeds through into oil prices, inflation expectations, and the path of monetary policy for the remainder of the year. The dollar also remains exposed to any Japanese intervention to support the yen, which fell to a 40-year low.

 

Zaid Barem / ymm