REUTERS, Singapore/London

The dollar rose against other major currencies on Monday as fears over inflation resurfaced after a surprise announcement by major oil producers to cut production targets further, with traders wagering the Federal Reserve may need to increase interest rates again at its next meeting.

The announcement on Sunday by the Organization of the Petroleum Exporting Countries (Opec) and its allies of output target cuts caused oil prices to jump by around 8 per cent in early trade in Asia on Monday.

Opec+ had been expected at a meeting on Sunday to stick to cuts of 2 million barrels per day (bpd) already in place until the end of 2023, but instead announced further output cuts of around 1.16 million bpd.

“A higher oil price will put pressure on global inflation and if we assume the banking turmoil continues to reside then the markets will increasingly focus on the inflation outlook,” said Mohamad Al-Saraf, Associate, FX and Rates Strategy at Danske Bank.

Markets are now pricing in around a 70 per cent probability of the Fed hiking rates by a quarter point in May, from around 50 per cent on Friday. But, by the end of the year, expectations are priced in for cuts of 40 basis points.