USD Holds Firm in Asia-Pacific as Oil Rises on US-Iran Tensions

The US dollar maintained its strength during the Asia-Pacific session on Monday, supported by rising oil prices and growing pessimism surrounding US-Iran negotiations. Crude oil prices held firm as geopolitical tensions dampened hopes for a diplomatic resolution, lending support to the greenback through risk-aversion flows and commodity-linked dynamics. Market participants are now shifting focus to the upcoming US April inflation data, with investment banks closely monitoring CPI expectations that could shape the Federal Reserve's monetary policy trajectory. Elevated oil prices tend to fuel inflation concerns, potentially reinforcing the Fed's cautious stance on rate cuts. The stronger dollar weighed on commodity-linked currencies such as AUD/USD and NZD/USD, while USD/JPY remained supported by the risk-off undertone. Asia-Pacific FX markets traded with a defensive bias as traders assessed the dual impact of geopolitical risk and inflation expectations. Near-term direction for the dollar index will likely hinge on Tuesday's CPI release, with any upside surprise potentially extending USD gains across the board. Traders should monitor oil price developments and diplomatic headlines for sudden shifts in sentiment.