BNY’s Bob Savage notes that escalating Middle East tensions and higher U.S. Treasury yields are driving risk-off flows, with the Dollar supported at two‑month highs. He highlights that KRW gained on official support while other EM FX such as MYR, IDR, HUF and INR weakened, suggesting yields are not compensating for risk. The Dollar’s path is tied to conflict, Oil and global risk sentiment.

Dollar holds firm on risk-off flows

“Financial markets reacted sharply, with Brent crude oil rising above $97/bbl and the U.S. dollar strengthening as investors sought safe-haven assets.”

“The renewed conflict has intensified concerns over energy supply disruptions and a potential increase in global inflation pressures.”

“While in other EM FX, MYR, IDR, HUF and INR all suffered, suggesting yields are not enough to offset risks.”

“Overall, the USD is bid at two-month highs, holding steady with focus on JPY and intervention risk.”

“The downside for today revolves around the breakout of more conflict and what it means for oil, the USD and the summer mood for U.S. consumers.”

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