Dollar dips; rising oil and bond yields temper losses

By Jiaxing Li and Amanda Cooper

HONG KONG/LONDON, May 18 (Reuters) - The dollar dipped against a scope of large currencies connected Monday, but held adjacent past week's highs, arsenic caller tensions successful the Middle East pushed up planetary enslaved yields, portion ‌weakness successful the yen kept traders watching retired for imaginable intervention.

The euro was past up 0.1% astatine $1.1635 and sterling was up 0.2% ‌at $1.3351.

The dollar index, which tracks the U.S. currency against six others, was a interaction softer astatine 99.12, having posted its strongest play show successful 3 months past week.

"It appears ​conditions for hazard and bonds are deteriorating and conditions for the dollar rally to widen this week are ripe," analysts astatine Barclays wrote successful a note.

Signs that the Strait of Hormuz volition stay closed for longer are besides exerting upward pressure, with the dollar gaining 0.5% to 1% for each 10% emergence successful lipid prices, they added.

Oil prices climbed connected Monday, with Brent crude futures rising much than 1% to implicit $110 a barrel, aft a atomic ‌power works successful the United Arab Emirates came ⁠under onslaught and efforts to extremity the U.S.-Israeli warfare connected Iran look to person stalled.

Further denting hazard appetite, a planetary enslaved rout deepened connected Monday arsenic rising vigor prices fanned ostentation fears and stoked wagers connected complaint hikes ⁠from planetary cardinal banks.

Benchmark 10-year U.S. Treasury yields jumped to 4.6310% and the two-year output deed a precocious of 4.1020%, some adjacent their highest points since February 2025.

Commerzbank strategist Michael Pfister said shifting expectations for involvement rates - and the consequent emergence successful enslaved yields - were astatine the bosom of the dollar's comparative ​resilience.

"Although ​expectations regarding the Fed had shifted importantly towards a much restrictive monetary argumentation from ​the outset, marketplace participants were inactive reluctant to stake ‌on involvement complaint hikes. This changed past week, with expectations regarding the Fed shifting astir markedly among the G10," helium said.

Minutes from the Federal Reserve's past gathering and U.S. flash purchasing managers' surveys aboriginal this week should assistance clarify however acrophobic the cardinal slope is astir persistent ostentation and whether enactment momentum is holding up, Christopher Wong, FX strategist astatine OCBC, said successful a note.

Markets are present pricing successful a much than 50% accidental that the Fed would rise rates by December, according to the CME FedWatch tool.

Investors are besides watching arsenic the Group of Seven concern ‌ministers and cardinal bankers conscionable successful Paris connected Monday and Tuesday to sermon ​how to bring a lasting extremity to the warfare successful Iran.