Dollar Holds Gains on Hawkish Fed Remarks

The dollar index held around 100.5 on Wednesday, hovering at its highest levels in eight weeks as hawkish comments from Federal Reserve officials bolstered bets for additional interest rate hikes this year. Richmond Fed President Tom Barkin warned on Tuesday that inflationary shocks could take time to fade, with a risk that elevated price pressures may become entrenched. Boston Fed President Susan Collins also said in a LinkedIn post that she supported last week’s rate hike amid concerns that future inflation could remain above the 2% target. Markets are currently pricing in roughly a 54% probability of another Fed rate increase in October. On the geopolitical front, oil prices extended their decline for a sixth consecutive session after President Donald Trump said US officials had a “very good” meeting with Iranian envoys, easing inflationary concerns and reducing safe-haven demand for the dollar.

The dollar index strengthened slightly to 100.6 on Tuesday, hovering near its highest level since late July, as it continued to benefit from a more hawkish stance from the Federal Reserve, reinforcing expectations for further interest rate hikes this year. On Monday, Chicago Fed President Goolsbee said the central bank cannot overlook repeated and persistent supply shocks, while St. Louis Fed President Musalem said additional rate increases may be necessary to bring inflation back toward the Fed’s target. Last week, the Fed raised interest rates for the first time in three years and signaled further tightening later this year to curb inflation. Meanwhile, oil prices continued to fall, though they remained off their session lows, as traders continued to assess diplomatic efforts to end the conflict in the Middle East. Traders also remained alert to the possibility of currency intervention to support the yen.

The dollar index held around 100.3 on Tuesday, staying near its highest level since late July as hawkish remarks from Federal Reserve officials reinforced expectations for further interest rate hikes. On Monday, Chicago Fed President Austan Goolsbee said the central bank cannot overlook repeated and persistent supply shocks, while St. Louis Fed President Alberto Musalem said additional rate increases may be necessary to achieve the Fed’s inflation target. Investors now await speeches from Fed officials John Williams and Tom Barkin later today. Last week, the Fed raised interest rates for the first time in three years and signaled further tightening later this year to curb inflation. Meanwhile, oil prices fell for four straight sessions amid increased diplomatic efforts to end the Middle East conflict and signs of continued energy flows from the region, easing inflation concerns. Traders also remained alert for possible currency intervention to support the yen.