Dollar Holds Above 100 After Fed Signals Hawkish Stance

The US Dollar Index held around the 100.3 level during Thursday's trading (Sept 17), following a sharp surge in the previous session. This strengthening pushed the dollar to a multi-week high after the Federal Reserve raised interest rates for the first time since 2023 and signaled that policy tightening could continue this year. Market data showed the Dollar Index hovering around 100.30 after previously breaching the psychological 100 mark.

The Federal Open Market Committee (FOMC) unanimously raised the Federal Funds Rate by 25 basis points to a range of 3.75%–4.00%. The decision aligned with market expectations and reflected the Fed's focus on curbing inflationary pressures that remain above target. This hike marked the US central bank's first tightening move in over three years.

Fed Chair Kevin Warsh emphasized that inflation remains too high and left the door open for additional rate hikes. The Fed's latest projections indicate that most officials anticipate at least one more increase before year-end. This hawkish stance drove up Treasury yields and bolstered the US dollar's appeal against major currencies.

Meanwhile, US President Donald Trump once again urged the Fed to lower interest rates to 1% or even lower. Despite differing views on central bank policy, Trump did not directly attack Warsh and had previously stated he retained confidence in the Fed Chair. The divergence in direction between the White House and the central bank remains a point of interest for market participants.

Outside the US, market attention has shifted to decisions by the Bank of England and the Bank of Japan. The BoE is expected to keep interest rates unchanged at its September meeting, even though rising energy costs have heightened inflation risks in the UK. Markets are also awaiting the BoJ's decision on Friday, amid expectations that the Japanese central bank might proceed with the normalization of its monetary policy.

Newsmaker Analysis: The US dollar retains strong support as long as markets maintain expectations of further rate hikes from the Fed. The DXY's ability to hold above the psychological level of 100 indicates that bullish momentum remains intact in the short term. However, its future direction will depend on US economic data and the policies of global central banks. If inflation remains high and the Fed maintains a hawkish stance, the dollar is likely to stay strong, whereas signals of monetary tightening from the BoE or BoJ could limit its appreciation against the pound sterling and the yen. (asd)