The dollar index was at 100.56, while the euro was at $1.1446, hovering near its lowest level since late July

The dollar steadied near its strongest level in two months on Wednesday ​on prospects of interest rate hikes in the near term, while easing oil prices on hopes for a diplomatic breakthrough to end the Middle East war kept investors on edge.

The euro was at $1.1446 in early trading, hovering near its lowest level since late July. Sterling bought $1.3337. The dollar index was at 100.56.

The recent barrage of rate hikes and ​hawkish rhetoric from some central banks has taken centre stage in currency markets as the US-Israeli war with Iran ​drives oil prices higher and fans inflation worries.

Investors are now anticipating further tightening from central ⁠banks, with U.S. central bank officials flagging the possibility of more hikes if inflation does not ease.

The dollar’s support from ​rates looks durable, but futures already price more tightening than the Fed’s own projections, so the dollar now needs the data ​to confirm it, said Kieran Williams, head of Asia FX at Intouch Capital Markets.

Oil markets remain in the spotlight with Brent crude futures at $99.22 per barrel on hopes that diplomacy at the UN General Assembly could pave the way for a resolution to the Middle East war. Brent ​has risen 37% since the war erupted at the end of February.

The ⁠good news is that oil prices have moderated somewhat from the highs but the path forward remains unclear given the lack of clarity around a possible resolution of the conflict, said Michael Wan, a currency analyst at MUFG.

Investors are also waiting for a high-stakes meeting between Chinese President Xi Jinping and Trump as the two leaders seek stability in a relationship ​under pressure over wide-ranging issues.