The dollar's rally continued as rising oil prices weighed on currencies of energy-importing nations and global inflation concerns persisted. The dollar index has now posted gains for a fourth consecutive week, accumulating an increase of nearly 3% over that period, marking its longest winning streak since early 2025. Brent crude climbed on Thursday after Iran launched fresh attacks threatening Middle East energy supplies, pushing investors toward safe-haven currencies.

"Risk-off sentiment, fiscal concerns in Europe, and unease over potential supply disruptions through the Strait of Hormuz continue to drive investors into the dollar as the only viable option," said Sarah Ying, head of foreign exchange strategy at CIBC Capital Markets. "Until oil prices retreat, we expect the dollar to remain strong." Another factor propelling the dollar higher is America's greater capacity to sustain higher interest rates compared with other major economies. France's fiscal troubles and elevated energy prices have pressured the euro, which earlier this week touched its lowest level since May 2025.

"I think part of the dollar's strength stems from the fact that, relatively speaking, the likelihood of higher rates is quite significant," said Robert Tipp, chief investment strategist and global head of bonds at PGIM Fixed Income. Last month, the Federal Reserve raised rates for the first time in three years, with central bank officials repeatedly signaling the need for further measures to curb inflation. On Thursday, Fed Governor Christopher Waller indicated that additional rate hikes may be necessary, though officials have some flexibility regarding timing. Similarly, St. Louis Fed President Alberto Musalem said rates should be raised over the next six to nine months but did not support action at this month's policy meeting.

However, concerns about artificial intelligence spending and the November U.S. midterm elections could act as headwinds to the dollar's rally. The dollar gave back some gains on Friday, with the dollar index slipping 0.1%. So far, the dollar has benefited from the AI boom and the record-breaking rally in U.S. equities that followed. U.S. stocks fell on Thursday amid reports that OpenAI's revenue came in below previous estimates. Investors are also worried about midterm election outcomes, which will determine the congressional landscape for the remainder of Trump's term. Surveys suggest Democrats could win at least one chamber of Congress, gaining control over legislative proposals. Some Wall Street strategists are preparing for Democrats to push for stricter AI regulation, which could trigger a market selloff.

"The risk from the midterm elections is that the dollar could begin to lose some of its appeal," said Dominic Bunning, head of G10 FX strategy at Nomura. "There's a possibility that Trump seeks to ease tensions with Iran in the weeks before the vote, hoping to get some relief on energy prices and thereby boost Republican odds." Trump said Thursday that the U.S. would not attack Iran before the November midterm elections. Earlier this month, he had said there was a "possibility" of intensifying military strikes on Iran after the elections. Data from the U.S. Commodity Futures Trading Commission showed that speculative traders remained bullish on the dollar for the week ending September 29, marking their second consecutive week of optimistic positioning on the greenback.

"At least in the short term, I hold a bullish stance because the AI capital expenditure outlook is strong, and capital continues to flow into the United States, which will drive up inflation and nominal economic growth," said Brent Donnelly, president of Spectra Markets.