US Dollar Index gathers strength to near 99.00 on Middle East tensions, robust US services data

• US Dollar Index strengthens to around 99.00 in Thursday’s early European session. 

• Fears of a prolonged war in the Middle East boost the safe-haven flows, supporting the DXY. 

• US services sector activity surged to a 3.5-year high in February. 

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 99.00 during the early European trading hours on Thursday. The DXY edges higher amid uncertainty and persistent geopolitical risks in the Middle East.

Israel said it was launching new strikes across Iran as well as against what it described as Hezbollah infrastructure in Beirut. Meanwhile, the Iranian government denied reports that it had sent a message to the US amid the ongoing conflict. 

Tehran declared that the armed forces had prepared for a long-term war instead of negotiating. Fears of a prolonged war could drive traders toward safe-haven currency such as the US Dollar in the near term. 

Economic activity in the US service sector gathered momentum in February, with the SM Services PMI rising to 56.1 from 53.8 in January. This figure came in stronger than the market expectations of 53.5. The resilient economic data might contribute to the DXY’s upside. 

Markets widely expect the US Federal Reserve (Fed) to leave the interest rate unchanged until the summer, though US President Donald Trump has pushed for lower rates.