Dollar Towers on Hawkish Fed View

The dollar index held around 100.3 on Thursday following a sharp gain in the previous session, hovering at seven-week highs after the Federal Reserve raised interest rates for the first time in three years and signaled further tightening this year to contain inflation. The FOMC increased the fed funds rate by 25 basis points to 3.75%-4%, as expected, in a unanimous decision. Fed Chair Kevin Warsh also said inflation remains too high, while data released last week showed core US inflation rose more than anticipated in August. Meanwhile, President Donald called for rates to be quickly lowered to 1% or below in a social media post, though he stopped short of criticizing Warsh. Elsewhere, the Bank of England is expected to keep rates unchanged today, while the Bank of Japan is scheduled to raise rates on Friday. On the geopolitical front, oil prices eased amid hopes that Saudi Arabia can restore energy flows through its East-West pipeline.

The dollar index rose past the 100 for the first time in nearly seven weeks on Wednesday after the Federal Reserve raised interest rates by 25bps. The decision was unanimous among the FOMC and expected by markets after recent data pointed to elevated gauges of underlying inflation, low unemployment, and a sharp rebound in retail sales that underscores the strong position of consumers despite higher price growth. Projections by the policy-setting committee pointed to a loose consensus that at least one other hike is warranted this year, while unemployment was revised lower and economic growth was revised higher. The decision supported the dollar after earlier remarks by Chairman Warsh raised skepticism over the Fed's willingness to fight inflation through higher policy rates instead of other tools, rekindling a dash to precious metals and other safe currencies. In the meantime, the Bank of England is expected to hold rates unchanged tomorrow, while the Bank of Japan is due to hike.

DXY increased to 99.86, the highest since August 2026. Over the past 4 weeks, Dollar Index gained 0.17%, and in the last 12 months, it increased 3.03%.