Dollar Index Hits 11-week Low

The dollar index traded around 102.3 on Wednesday, its highest level since March 2025, as volatility in oil markets continued to fuel inflation concerns, reinforcing expectations that the Fed may need to keep monetary policy tighter for longer. Meanwhile, minutes from the September FOMC meeting showed that most Fed officials supported another rate hike this year, although they signalled no urgency to act. The odds of a rate hike in October fell to 17%, from around 70% in the days following the September decision, while the probability of a 25bps hike in December edged up to around 70%. The greenback strengthened broadly, gaining the most against the euro, as political and fiscal concerns in Spain and France weighed on the common currency.

The dollar index strengthened to above 102.4 on Wednesday, its highest level since March 2025, as rising oil prices fueled inflation concerns and again reinforced expectations that Fed would need to keep monetary policy tighter for longer. Investors are also awaiting the release of the FOMC minutes later in the day for further insight into the Fed’s policy outlook, following last month’s 25-basis-point rate hike, the first increase in borrowing costs since 2023. Markets are currently pricing in nearly a 78% chance that the central bank will leave rates unchanged this month, while the probability of a 25bps rate hike in December stands at around 69%. The greenback strengthened broadly, gaining the most against the euro, as political and fiscal concerns in Spain and France weighed on the common currency.

The dollar index steadied around 102 on Wednesday after coming under pressure in the previous session, as investors awaited minutes from the Federal Reserve’s latest meeting for clues on the outlook for monetary policy. Traders also watched remarks from Fed officials, with policymakers increasingly signaling a less hawkish stance on interest rates following softer-than-expected PCE inflation and jobs data released last week. Markets are currently pricing in nearly an 80% chance that the Fed will keep policy unchanged this month. Meanwhile, investors continued to monitor bond markets after a recent selloff fueled by concerns over persistent inflation, rising fiscal risks and elevated levels of AI-related debt issuance. Elsewhere, oil prices climbed as Iran intensified attacks on tankers in the Strait of Hormuz and Saudi forces continued clashes with the Houthis, keeping inflationary pressures and rate hike concerns in focus.