The US dollar rebounds, but energy pressures test the limits

Huitong Finance APP News — On Thursday, April 2, the U.S. Dollar Index showed a clear reversal trend. The U.S. President delivered a nationwide address, covering major progress toward the core targets of the conflict, but also clearly stated that the wrap-up phase would still require at least 2 to 3 weeks. This statement created a gap from the market’s previous widespread expectations for a rapid resolution, causing bullish sentiment to fade quickly.

The Dollar Index rebounded to around 100. The EUR/USD exchange rate fell 0.4% to the 1.1530 area and is now testing support at the 100-hour moving average line. In the crude oil market, Brent crude oil futures rose to around $108 per barrel, up about 7% from the previous trading day, and WTI crude oil futures also climbed to $106 per barrel. Uncertainty continues around key nodes in the energy supply chain, directly shifting risk sentiment toward caution. Traders are closely monitoring how subsequent geopolitical developments will affect the pricing of global assets.

Drivers of the Dollar Rebound

After the President’s speech, market focus quickly shifted to the actual state of the Strait of Hormuz transportation corridor. This strait’s daily oil shipments account for a significant share of global trade; if the disruption continues, it will create sustained pressure on the flow of crude oil and natural gas. Although the speech emphasized that military capabilities have been badly damaged, it did not provide a clear end signal, leading traders to extend their expectations for how long it will take for energy supply to recover. The U.S. dollar, as a traditional safe-haven asset, attracted funds back in this environment, supporting its exchange-rate strength. The U.S. Dollar Index has remained around the 100 level, reflecting a repricing of major currency pairs under safe-haven demand dominance. Similar historical events show that when energy prices stay high and lift global inflation expectations, market interpretations of the Federal Reserve’s policy path also become more cautious. Overall, the speech failed to immediately ease supply-chain bottlenecks, which is the core catalyst behind the dollar rebound.

The Logic Behind Higher Energy Prices

As a key choke point for global energy transportation, the status of the Strait of Hormuz directly determines the stability of crude oil and natural gas supply. After the speech, the market judged that the disruption could last for several more weeks, which would magnify supply gaps of millions of barrels per day. Brent and WTI crude oil prices rose in tandem, with gains exceeding 6%, reflecting traders’ repricing of pressure in the April energy market. The natural gas market was also affected, with increased price volatility, further transmitting to industrial and transportation costs. Historically, similar events have caused energy prices to accumulate more than 20% in the short term, and indirectly influenced global economic growth expectations.

The Interlinking Mechanism Between FX Markets and Commodities

Traders observed that for every $1 per barrel increase in oil prices, there is corresponding potential support of about 0.1% to 0.2% for the U.S. Dollar Index. Other major currency pairs, such as GBP/USD and USD/JPY, showed similar divergence. While the yen, as another safe-haven asset, has some support, the overall advantage of the U.S. dollar is more pronounced. Against this backdrop, the policy paths of major central banks such as the Federal Reserve and the ECB draw even more attention: higher energy costs may push up short-term inflation readings, but perhaps won’t change the tone of neutral monetary policy.

FAQ

Question 1: Why did the U.S. President’s speech lead to a rebound in the U.S. Dollar Index?

Answer: Although the speech mentioned that the conflict’s objectives are nearing achievement, it explicitly said the wrap-up would require 2 to 3 weeks, extending expectations of a disruption in the Strait of Hormuz. The market had previously priced in a rapid recovery, but the reality fell short, driving an increase in safe-haven demand. As a core safe-haven asset, the U.S. dollar received support, and the index rebounded to around 100.

Question 2: What is the core impact on global markets when energy prices rise?

Answer: Continued supply disruption will raise crude oil and natural gas costs, indirectly lifting inflation expectations and amplifying economic uncertainty. Traders need to watch how this transmits to supply chains and corporate profitability, not just a single price level.

Question 3: How should we understand the linkage logic between FX and energy?

Answer: When oil prices stay high, it strengthens risk aversion, supporting the U.S. dollar’s relative strength while weighing on the performance of commodity currencies. Historical data shows that such linkages often persist for several weeks in periods of uncertainty. Key monitoring indicators include reports on strait shipment volumes and technical levels of major currency pairs.

(Editor: Wang Zhiqiang HF013)

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