The euro fell 0.26% to settle at $1.17095, while the pound sterling was down 0.1% to trade at $1.3524.
The Australian dollar remained steady at $0.72410, while the New Zealand dollar lost 0.3% and fell to $0.59345.
The U.S. dollar index rose 0.2% to 98.501 and its highest level since May 5. This reflects its strengthening against a basket of six major currencies.
Oil prices fell 1%, remaining above $100 a barrel. Brent crude futures last traded at $106.6 a barrel.
Tensions are rising
Hope for a Middle East peace deal has waned after President Donald Trump said a ceasefire with Iran is in danger of collapsing because of Tehran’s refusal to accept a U.S. offer.
Trump also said he did not need China’s support to resolve the conflict with Iran ahead of a meeting with Chinese President Xi Jinping scheduled for this week.
Tommy von Brömsen, currency strategist at Handelsbanken in Stockholm, emphasized that the situation in the Strait of Hormuz has a significant impact on global markets. He noted that the longer the tensions continue, the more difficult the position of central banks becomes.
High inflation figures in the U.S. have pushed up Treasury bond yields. Expectations of a Fed interest rate cut have faded, while the likelihood of a December interest rate hike has increased. Hopes for a peace agreement with Iran are melting away. Now the focus is on the meeting between Trump and Xi Jinping.
