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The US dollar retreated from multi-month highs this week as rising energy prices disrupted global interest rate expectations.

This is according to a report by Reuters on Friday.

The report indicated that the US Federal Reserve is now the only major central bank not expected to hike rates this year.

The shift in outlook comes amid escalating tensions in the Middle East, which have significantly impacted global oil and gas supply dynamics.

Meanwhile, Nigeria’s naira depreciated to N1,362/$ on Wednesday, according to data from the Central Bank of Nigeria (CBN), with no trading recorded on Thursday due to the Eid al-Fitr public holiday.

The dollar index weakened this week, falling 1.1% to 99.359, marking its largest weekly decline since late January. This comes as investors reassess monetary policy expectations following a surge in global energy prices.

The data reflects a broad-based weakening of the dollar as other currencies strengthen on expectations of tighter monetary policy outside the United States.

Reuters noted that global central banks are increasingly signalling a shift toward tighter monetary policy in response to inflation risks driven by rising energy prices. While the Federal Reserve has maintained a cautious stance, its counterparts appear more inclined toward rate hikes.

These developments highlight a divergence in global monetary policy, with the Fed adopting a wait-and-see approach while others move toward tightening.

The dollar had previously strengthened on expectations of US rate cuts and relative stability in American monetary policy.

However, the escalation of the US-Israel conflict with Iran has driven a sharp increase in oil prices, complicating inflation outlooks and forcing central banks globally to reconsider their policy paths.

This has shifted investor sentiment away from the dollar toward other major currencies.

The Federal Reserve left interest rates unchanged this week, with Chair Jerome Powell stating it is too early to determine the economic impact of the ongoing conflict.

Nairametrics reports that at its last meeting, the South African Reserve Bank’s Monetary Policy Committee held the benchmark rate steady at 6.75%.