Finance
US dollar rises on higher PPI and US-Iran tensions
Published by Global Banking & Finance Review®
Posted on February 27, 2026
4 min readLast updated: February 27, 2026
Quick Summary
The dollar firmed after January PPI surprised to the upside, reinforcing the view that inflation is proving sticky and could delay Fed easing. Risk-off support also came from heightened U.S.-Iran tensions, while China moved to cool a rapid yuan rally by easing FX-forward rules. ([bls.gov](ww
US dollar gains after hotter PPI print and rising US-Iran tensions
By Karen Brettell
Market wrap: Dollar rises on inflation data and geopolitical risk
NEW YORK, Feb 27 (Reuters) - The U.S. dollar rose on Friday after hotter-than-expected producer price data for January and on concerns about rising tensions between the United States and Iran.
Inflation data: PPI surprises to the upside
The Producer Price Index for final demand rose 0.5% last month after advancing by a downwardly revised 0.4% in December. Economists polled by Reuters had forecast the PPI gaining 0.3% after a previously reported 0.5% increase in December.
“There's a real deep unease in markets about inflation and growth so far in 2026,” said Adam Button, chief currency analyst at investingLive. “There's this expectation that inflation will moderate, but it's not showing up in the numbers.”
Underlying details and interpretation
Underneath the headline number, however, there were signs of improvement, said Chris Low, chief economist at FHN Financial.
“While the PPI headline increase was alarmingly big, pressure came from trade services, a category the BLS notes is calculated in a way that does not capture true price changes in real time,” Low said in a report. “Otherwise, there is evidence of price moderation.”
Currency markets: Dollar index, euro, yen and rate expectations
DOLLAR TRACKS FIRST MONTHLY GAIN SINCE OCTOBER
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.06% to 97.79, with the euro flat on the day at $1.1797.
The dollar index is headed for a 0.64% monthly gain, its first monthly increase since October. The euro is on track for a 0.42% loss, its first down month since October.
Against the Japanese yen, the dollar strengthened 0.03% to 156.16. The U.S. currency is headed for a 0.9% gain against the yen this month.
Federal Reserve outlook and market pricing
The U.S. Federal Reserve is expected to keep rates on hold until at least June due to concerns about still elevated inflation.
But traders are pricing in 60 basis points of cuts by year-end on concerns about a weakening labor market.
Geopolitics and risk sentiment: US-Iran talks, oil and broader market tone
The dollar was boosted earlier by a safety bid on concerns about a conflict between the U.S. and Iran.
The two countries made progress in talks over Tehran's nuclear program on Thursday, mediator Oman said, but hours of negotiation ended with no sign of a breakthrough that could avert potential U.S. strikes amid a massive military buildup.
Oil and cross-asset moves
Oil prices rose about 3% on Friday as traders remained on alert for potential supply disruptions if relations worsen.
Overall market moves this week have been muted as traders gauge the geopolitical uncertainty along with the impact of new tariffs, after the U.S. Supreme Court last week struck down U.S. President Donald Trump’s emergency tariffs.
"The dollar has been trading in a little bit of a holding pattern. It feels like it's waiting for its next real catalyst," said City Index market strategist Fiona Cincotta.
Other major currencies and crypto: Yuan, sterling and bitcoin
The yuan took a breather from a 10-day rally after the People's Bank of China moved to slow the pace of the rise. It said it would scrap the foreign exchange risk reserves for some forward contracts - seen as a way to encourage dollar buying.
UK politics and sterling sensitivity
Sterling fell 0.22% to $1.3451, and was set to snap three straight months of gains with a 1.75% fall in February.
A local election in Manchester on Thursday delivered a big victory to the Green Party and a blow to Prime Minister Keir Starmer's Labour, whose popularity has slid sharply in the past year.
Upcoming risk events
Sterling is sensitive to domestic politics, but with risk events ahead, such as next week's budget update from finance minister Rachel Reeves, any volatility was contained.
In cryptocurrencies, bitcoin fell 2.30% to $65,924.
(Reporting by Karen Brettell; Additional reporting by Amanda Cooper and Rae Wee; Editing by Rod Nickel)
Key Takeaways
- •January PPI rose 0.5% m/m (vs 0.3% expected) and 2.9% y/y, driven by a 0.8% jump in services and a 2.5% surge in trade-service margins—details that help explain why the report looked hot even as goods prices fell 0.3% on cheaper energy. (bls.gov)
- •Geopolitical risk added a safe-haven bid: Oman said U.S.-Iran nuclear talks made “significant progress” but ended without a deal, keeping markets alert to escalation risk alongside the large U.S. military buildup referenced in coverage. (ft.com)
- •China signaled discomfort with the yuan’s strength by removing the 20% FX risk-reserve requirement on certain forward contracts (effective March 2, 2026), a move widely read as making it cheaper to position for/hedge via more dollar buying and thus slowing RMB appreciation. (ft.com)
References
Frequently Asked Questions about US dollar rises on higher PPI and US-Iran tensions
1Why did the US dollar rise in this session?
The dollar rose after a hotter-than-expected January Producer Price Index and on safe-haven demand amid rising US-Iran tensions.
2What did the January Producer Price Index report show?
The PPI for final demand increased 0.5% in January, above the Reuters poll forecast of 0.3%, after a downwardly revised 0.4% rise in December.
3What levels were highlighted for the dollar index, euro, and yen?
The dollar index was up 0.06% at 97.79, the euro was flat at $1.1797, and the dollar was up 0.03% versus the yen at 156.16.
4What are markets expecting from the Federal Reserve this year?
The Fed is expected to keep rates on hold until at least June due to still-elevated inflation, while traders are pricing in about 60 basis points of cuts by year-end on labor market concerns.
