'Little alternative': Dollar up for 4th straight week, longest run since early 2025

The U.S. dollar is posting its longest streak of weekly gains since early 2025 as oil prices have stayed amid fresh attacks on shipping from Iran, Bloomberg reports. However, risks associated with AI investment and the geopolitical situation ahead of the U.S. midterm elections could weaken the currency, some analysts reckon.

The Bloomberg Dollar Spot Index is advancing for a fourth straight week, its longest run of weekly gains since early 2025. The gauge has risen almost 3% over that period. On Friday, as the yield on 10-year Treasuries climbed four basis points to 5.27%, the index gained 0.2%. Overall, the dollar is being supported by elevated oil prices and geopolitical tensions in the Middle East, which are fueling market concerns about disruptions to energy supplies, Bloomberg explains.

At the same time, high energy prices are increasing inflation risks and reinforcing expectations that the Fed will have to continue tightening monetary policy after raising rates in September. “With global bonds and risk sentiment still looking fragile, and a hawkish Fed narrative keeping markets convinced of a December hike, we retain a preference for a slightly stronger dollar in the near term,” Francesco Pesole, a currency strategist at ING Groep NV, wrote in a note.

The dollar is also receiving support from the U.S. economy’s ability to withstand more interest-rate increases than other major economies, Bloomberg reports. The euro, for example, is under pressure from France’s fiscal problems, as well as high energy prices. Earlier this week, the single currency fell to its weakest level since May 2025.

“Until oil prices come back down we see a period of sustained dollar strength,” said Sarah Ying, head of FX strategy at CIBC Capital Markets. “Risk off, fiscal concerns in Europe, and fears of supply disruptions out of the Strait of Hormuz continue to push investors into the dollar given little alternative,” she added.

The dollar’s advance could be derailed by concerns over AI spending and the geopolitical situation ahead of the U.S. midterm elections in November, Bloomberg says. So far, the U.S. currency has benefited from the AI boom and a record-setting rally in U.S. stocks that has attracted foreign investment. On Thursday, however, U.S. stocks fell after reports that OpenAI’s revenue had fallen short of expectations.

The midterm elections pose an additional threat to the dollar. Polls show that the Democratic Party could take control of at least one chamber of Congress, allowing it to pursue its policy priorities more aggressively, potentially including tighter regulation of the AI industry. Such a scenario could trigger a stock-market selloff, Bloomberg flags.

Another negative factor for the dollar could be a shift in the Trump administration’s policy toward Iran. “The risk going into midterms, however, is that the dollar starts to lose a bit of shine,” said Dominic Bunning, head of G10 FX strategy at Nomura. “There is a risk Trump looks to de-escalate on Iran in the weeks ahead of the vote, get a bit of respite on energy prices to help boost Republicans’ chances.”

On Thursday, Trump vowed the U.S. would not attack Iran before the November elections. Earlier this month, in an interview with Time, he called an escalation of military strikes after the elections “possible.”

Since the war between Iran and the U.S. began in late February, Brent crude is up around 44%, while U.S. benchmark WTI has risen 37%.