Dollar Stable Against Shekel Amid Global Geopolitical Tensions and Inflation Fears

The U.S. dollar remained stable against the Israeli shekel, trading at 3.02 shekels, while the euro saw a slight increase of 0.3% to trade above 3.51 shekels. Globally, the dollar index edged up 0.1% to 98.8 points against a basket of major currencies. The euro and British pound held steady against the dollar, trading above $1.16 and $1.35 respectively. In Japan, the dollar weakened by 0.2% to 153.6 yen, nearing a seven-month high for the Japanese currency.

Investors are closely monitoring geopolitical tensions in the Persian Gulf and their potential impact on inflation. Recent attacks by Yemen's Houthi rebels, supported by Iran, on energy facilities and cities in Saudi Arabia, a U.S. ally, injured over 70 people and highlighted the risk of a wider conflict with Iran. These events are contributing to rising oil prices, with Brent crude approaching $100 per barrel.

Market participants are also awaiting the U.S. Consumer Price Index for August, due Friday, ahead of the Federal Reserve's upcoming meeting next Wednesday. Expectations are growing for an interest rate hike, with the market currently assigning a 60% probability to such a move.

U.S. Treasury Secretary Scott Austan addressed high U.S. bond yields at a conference, clarifying that the government's bond buybacks are intended to improve market liquidity rather than reduce national debt. He stated that while interest rates are high and correlated with energy prices, this connection is expected to weaken. Austan anticipates a supply surplus in the oil market within one to two years due to factors including U.S. energy relations with Venezuela and a return to normalcy in the Middle East.

Austan expressed confidence in the U.S. economy's ability to manage its debt, projecting that 3% annual economic growth could help overcome the challenge. He noted that the issue lies with spending rather than revenue. The U.S. national debt has surpassed $40 trillion, with the annual budget deficit projected to exceed $2 trillion by the end of the fiscal year on September 30. Austan also pointed to incentives in last year's tax law fostering new manufacturing facilities, citing examples like Frito-Lay's expansion in Arizona, Winnebago's battery plant acquisition, and Boeing's Dreamliner production increase. He is working on a fiscal reduction plan with the Office of Management and Budget to decrease the deficit, preferring not to rush it through Congress before the upcoming midterm elections.