TLDRThe greenback temporarily surged to a seven-week peak at 100.667 on the Dollar Index before moderatingCrude oil markets experienced significant volatility following Iran’s proposal to reopen the Strait of Hormuz in one weekJapan’s currency weakened for a third consecutive session, reaching 157.69 against the dollarTraders assign 55% probability to additional Federal Reserve rate increase in OctoberCurrencies in Australia and New Zealand responded to policy commentary from their central bank leadersThe greenback advanced to its strongest level in seven weeks during Tuesday’s trading session before moderating, as petroleum market volatility and monetary policy expectations shaped currency movements globally.The U.S. Dollar Index advanced 0.1% to settle at 100.49, after reaching a session high of 100.667. The benchmark had already appreciated over 1% during the previous week following the Federal Reserve’s quarter-percentage-point interest rate increase and guidance suggesting additional tightening ahead.US Dollar Index(DX-Y.NYB)Current market positioning reflects a 55% probability of an additional quarter-point rate increase at the Federal Reserve’s October policy meeting, based on CME FedWatch Tool data.Petroleum markets played a significant role in driving initial dollar momentum. Advancing crude values supported the greenback given America’s position as a net petroleum exporter, while the currency also attracts safe-haven flows during periods of energy market turbulence.However, prices shifted direction after Japan’s Kyodo News published a report indicating Iran had proposed reopening the Strait of Hormuz within one week, contingent upon the United States reducing military presence in the area.U.S. President Donald Trump indicated receptiveness to potential direct discussions with Iranian President Masoud Pezeshkian during the ongoing UN General Assembly this week.IRAN HAS INFORMED THE TRUMP ADMINISTRATION THAT IT WILL OPEN THE BLOCKED STRAIT OF HORMUZ "WITHIN SEVEN DAYS" IF IT ACCEPTS DEMANDS SUCH AS LIFTING THE US MILITARY BLOCKADE OF IRANIAN PORTS, ACCORDING TO A SENIOR IRANIAN GOVERNMENT OFFICIAL ON THE 22ND. WITH IRAN'S CRUDE OIL…— First Squawk (@FirstSquawk) September 22, 2026The possibility of diplomatic engagement contributed to crude oil and European natural gas futures retreating from their multi-week peaks.Japanese Currency Extends Losses as Intervention Speculation BuildsThe Japanese yen depreciated 0.33% to 157.69 versus the dollar, marking its third consecutive day of losses. The decline occurred even after the Bank of Japan implemented a 25-basis-point rate increase to 1.25% during the prior week.Market liquidity in Tokyo remained constrained due to ongoing public holidays, which market participants noted intensified price movements. The Nikkei newspaper disclosed that the Bank of Japan executed formal “rate checks” with currency trading desks, a maneuver frequently interpreted as preparation for potential market intervention.Japanese authorities maintain approximately $1 trillion in foreign currency reserves, providing substantial firepower to support the yen should intervention become necessary.The euro declined 0.1% to $1.1456, while the British pound edged lower to $1.3364.Australian Dollar Stable, New Zealand Currency Advances on Inflation CommentaryThe Australian dollar remained unchanged at $0.7123 following public remarks from Reserve Bank of Australia Governor Michele Bullock. Current market expectations indicate a 90% likelihood of a rate increase from the RBA at next week’s meeting.The New Zealand dollar appreciated to $0.5735 after Reserve Bank of New Zealand Governor Anna Breman noted that elevated petroleum prices would likely drive inflation projections moderately higher.The movements among Asia-Pacific currencies demonstrated the strong correlation between monetary policy expectations and energy price dynamics in current market conditions.With the UN General Assembly in session and potential Iran-U.S. diplomatic engagement on the horizon, foreign exchange traders remain vigilant for any developments that could influence petroleum prices and subsequently impact dollar trajectories.The post Greenback Surges to Seven-Week Peak Amid Fed Rate Speculation and Iran Developments appeared first on Blockonomi.