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Dollar primed for strongest month in nearly a year; jobs data, Gulf tensions in focus

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The U.S. dollar was on the defensive on Monday, but still set for its greatest monthly gain in almost a year as tension in the Gulf and ahead of jobs data that might affect the Federal Reserve’s rate path.

The U.S. and Iran hurled additional insults over the weekend before agreeing to suspend tit-for-tat attacks and meet in Qatar on Tuesday, leaving investors anxious about a fragile ceasefire.

Oil prices increased on Monday as strikes again disrupted petroleum shipping in the Strait of Hormuz, underpinning safe-haven demand for the dollar.

The euro was unchanged at $1.1387 after hitting a 13-month low versus the dollar last week and was set for a 2.3% monthly drop. Sterling fell 0.1% to $1.3198 and was down 2% on the month.

The risk-sensitive Aussie was at $0.6885, down 0.1% in early trade and on track for a 4.1% fall this month. The New Zealand dollar was steady at $0.5635, down 5.9% on the month.

The Japanese yen was last quoted at 161.75, staying at a 40-year low.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was a little higher at 101.36.
It is currently on course for a 2.5% gain in June, the highest monthly gain since July last year.

The spat with Iran has kept inflation pressures at bay, while a surprisingly hawkish debut by Federal Reserve Chair Kevin Warsh earlier this month has overturned market expectations for U.S. rate reduction this year.

Flows into the dollar are also being driven by a tech-led global market selloff as investors seek refuge.

Investors will be looking the US non-farm payroll (USNFAR=ECI) and unemployment rates (USUNR=ECI) expected this week for fresh signals on the strength of the labour market and the outlook for Fed policy.We see the USD grinding higher in the coming weeks on the story of ‘US exceptionalism,’” said Joseph Capurso, head of foreign exchange at Commonwealth Bank of Australia, in a note.

“Labour markets are strong and getting stronger, so it’s a recipe for higher interest rates and a stronger dollar in the U.S.,” he added.

Investors are also monitoring closely the European Central Bank’s annual forum this week as they keep tabs on developing ⁠central bank ​policies amid reduced oil prices and stock market volatility.

ECB President ​Christine Lagarde kicks off the forum Monday before a major policy panel Wednesday with Fed Chair Warsh, with markets seeking for ​a clearer read on the next Fed leader.

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Foreign investment inflows in Pakistan up 80pc in August

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Pakistan’s net foreign direct investment (FDI) jumped 80 percent year-on-year to $316 million in August, the country’s financial advisor said on Sunday, calling it a “positive signal” as Islamabad transitions from macroeconomic stability to investment-led, sustainable development.

The $316 million foreign investment inflows was the greatest monthly level reached by the country in the last two years, while it marked a 77 percent increase on a month-on-month basis, Khurram Schehzad, an assistant to Finance Minister Muhammad Aurangzeb, said in a post on X.

The increase was backed by better investment inflows from China, Canada and the UAE, along with a reduced repatriation and outflows, leading to a much stronger net FDI position during the month,” he said.

Pakistan’s net FDI plummeted 34 percent to $1.64 billion or 0.39 percent of gross domestic product in the Fiscal Year 2025-26 that ended in June, according to World Bank data.

This was far below the previous average of about 2 percent of GDP for Emerging Market and Developing Economies and much below the roughly 5 percent peak reported in 2008.

For policymakers, investment promotion should not cease after an investor joins the nation, said the former minister.

“It’s about shifting investment, thinking from measuring capital flows only to understanding how capital creates enduring economic capability.”

Consumer prices in Pakistan surged to 11.1 percent in August from 9.2 percent in July, exceeding the central bank’s medium-term inflation target of 5-7 percent further.

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With hopes of improving diplomacy in the Iran War, oil hits a one-week low.

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Oil prices fell to their lowest in more than a week on Monday on hopes diplomacy in the Iran war will get a chance this week amid a UN meet and as investors watched a partial recovery in shipments from Saudi Arabia despite continuous attacks by Yemen’s Houthis.

Brent crude futures and US West Texas Intermediate crude earlier on Monday dropped to their lowest since Sept. 10. Brent was at $101.71 a barrel by 0213 GMT, down $2.16, or ​2.08%, after finishing 0.91% lower on Friday.

U.S. West Texas Intermediate crude fell $2.15, or 2.14 percent, to $98.15 a barrel after a 1.58 percent decline in the previous session.“The risk premium is being stripped out of oil prices on the back of hopes that a diplomatic solution to the US-Iran war may be found this week,” said Tim Waterer, chief market analyst at KCM Trade.Whether that hope will be fulfilled remains to be seen. “We’ll see how it goes.

The WTI broke a major psychological support at $100 a barrel while some investors may have rolled over their positions in the October contract a day ahead of expiry to November, said a broker in Singapore.

Iran and the US traded more threats on Sunday as the standoff continued, but President Donald Trump indicated he would be open to meeting Iranian President Masoud Pezeshkian, who is due in New York this week for the United Nations General Assembly.

Iran has informed mediators about its prerequisites for resuming talks to end the war with the US, Iran’s security chief Mohsen Rezaei said in an interview on Saturday, Al Jazeera reported.

But tensions in the Middle East remained elevated as Yemen’s Iran-backed Houthis said they struck “sensitive” locations in the Saudi capital Riyadh on Saturday with missiles and drones, as well as an Aramco facility in the Red Sea city of Yanbu, a vital oil export centre.

Three Iranian sources acquainted with the situation said China had asked Iran to assist reign in the Houthis following a plea to Beijing by Saudi Arabia after the strikes.

Houthi strikes on Saudi Aramco’s East-West pipeline have led the state energy corporation to boost exports through the Strait of Hormuz this and next month after halting some shipments through Yanbu.

That meant OPEC kingpin exports ​bounced up to around 4 million barrels per day (bpd) so far in September after falling to ​2.4 million bpd ⁠in August, the lowest since at least 2013, according to interim statistics from analytics firm Kpler.”Oil flows in the Middle East are surprisingly resilient despite disruption to Saudi Arabia’s East-West pipeline,” JPMorgan analysts said in a note on September 18 adding the overall oil flows averaged 17.1 million bpd in the past 10 days, barely 6.1 million bpd below the 2025 average.“The most ​notable pivot has come from Saudi Arabia,” the experts said. Satellite data showed Saudi oil transiting the Strait of Hormuz averaged 2.9 million bpd over ​the preceding six days, up from just 700,000 bpd in August.

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PSX turned bearish as KSE-100 crossed 600 points

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The Pakistan Stock Exchange turned bearish in early trade on Wednesday, with the KSE-100 index dropping over 600 points.

At the start of the third session of the week, the index had fallen more than 600 points to 168,732 points. Previously on Tuesday, the benchmark index showed an upward trend, increasing by 1,421.67 points (up 0.85%) to close at 169,392.33 points compared to 167,970.66 points in the previous session.

In the ready market, the trading volume was 372,016,000 shares as against 570,472,000 shares in the previous trade and the trading value was Rs 17,210 million as against Rs 24,672 million. The market capitalization increased to Rp 18,857 billion from Rp 18,728 billion the previous day.

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