U.S. Dollar Index Rises 0.1% Weekly as Rate-Cut Expectations Face Geopolitical Hedging Demands

The U.S. Dollar Index (DXY) gained 0.1% on Friday (July 10), closing at 100.96, with a weekly advance of approximately 0.1%. Markets continued to weigh inflation dynamics and their impact on Fed policy against rising geopolitical risks, as the largest U.S.-Iran military escalation since a temporary ceasefire heightened oil price pressures. Fed officials remain divided on rate prospects, with June meeting minutes and a Congressional report underscoring lingering inflation concerns from Middle East tensions, AI-driven energy demand, and tariff pressures.

Meanwhile, the Japanese yen surged 0.4% against the dollar to 161.73, buoyed by Japan's structural policy initiative. Financial Minister Satsuki Katayama revealed the government is exploring measures to increase the Government Pension Investment Fund's (GPIF) domestic asset allocation. With GPIF managing 293.6 trillion yen (approximately $1.81 trillion), a partial reallocation of overseas holdings back to Japan is expected to drive structural demand for the yen.