USD Strengthens on Energy Shock Risks as BOJ Eyes 2% Rate by 2027

The US dollar is seeing broad strength across Asia-Pacific markets as Goldman Sachs highlights elevated energy-related risks keeping US yields firm. Geopolitical tensions have intensified with US assessments revealing Iran has rebuilt access to 30 of 33 Hormuz Strait missile sites, raising oil supply disruption concerns. Morgan Stanley has outlined four oil shock scenarios ranging from Fed rate hikes to a global recession, adding further uncertainty. The New Zealand dollar faces pressure as an RBNZ survey shows rising inflation expectations, complicating the central bank's easing narrative. Meanwhile, the Japanese yen remains in focus as the OECD projects the Bank of Japan will hike rates to 2% by end-2027, with the OECD chief endorsing the BOJ's gradual normalization path. On the trade front, NVIDIA CEO Huang is reportedly traveling to China with President Trump, signaling potential developments in US-China trade relations ahead of anticipated Trump-Xi talks. Australian dollar traders are also monitoring developments closely given commodity exposure to Middle East oil risks. Traders should watch for further escalation in geopolitical tensions as a catalyst for safe-haven flows.