Dollar Holds Losses on Fed Uncertainty

The US dollar index traded around 102.1 on Thursday, holding on to losses from the previous session after the Federal Reserve kept interest rates unchanged as widely expected but provided limited clarity on its next policy move. Fed Chair Kevin Warsh also indicated that the central bank could reduce the number of interest-rate decisions from eight to six annually, adding to market uncertainty. Meanwhile, two officials dissented in favor of a 25-basis-point rate hike, strengthening market expectations for a potential increase in December amid persistent energy-driven inflation. Investors are now awaiting the US PCE price index, the Fed’s preferred inflation gauge, for further signals on the future path of monetary policy. Attention is also turning to upcoming policy decisions from the European Central Bank and the Bank of Japan, with both central banks widely expected to leave interest rates unchanged.

The US Dollar Index slipped to 102.1 on Wednesday after the Federal Reserve kept interest rates unchanged as expected, while subtle changes in its policy statement were interpreted as signs of a slightly more dovish stance. The FOMC voted 10–2 to maintain the federal funds rate within the 3.75%–4% range, with Governor Lisa Cook and Cleveland Fed President Beth Hammack dissenting and favoring a 25-basis-point increase. However, policymakers offered no clear indication of whether rates could rise again in December, emphasizing that incoming data would guide future decisions and help bring inflation back to the 2% target. During the post-meeting press conference, Fed Chair Kevin Warsh also announced that the FOMC would continue to hold eight meetings annually but plans to reduce the number of policy rate decisions to seven in 2027 and six in 2028. The announcement comes less than a week before the November midterm elections, amid widespread public dissatisfaction with the economy.

The US dollar index held around 102.4 on Wednesday after advancing for three consecutive sessions, supported by investor caution ahead of the Federal Reserve’s upcoming policy decision. The central bank is widely expected to keep interest rates unchanged, although traders will look for clues about the possibility of a rate hike in December. On the corporate front, Alphabet and Microsoft are set to release earnings after the market closes on Wednesday, with investors assessing their results for insights into AI-related demand, which has contributed to US economic growth. Meanwhile, the dollar gained more than 1% against the kiwi after the Reserve Bank of New Zealand unexpectedly kept its cash rate unchanged, defying expectations for a 25-basis-point increase. Investors will also monitor upcoming monetary policy decisions in Canada, the Euro Area, and Japan.