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The Emirates News Agency reported that the dollar held near multi-week highs as investors awaited an expected US rate hike from the Federal Reserve. Market participants have grown increasingly confident that policymakers will lift borrowing costs by 25 basis points at the conclusion of their two-day meeting. The move would mark the first increase in more than three years amid renewed inflation concerns driven by energy prices. Reuters reported that the dollar index, which measures the greenback against a basket of currencies, stood at 99.55 while the euro traded at $1.1538 and sterling at $1.3494.
Oil prices climbed to around $107 a barrel after geopolitical developments in the Middle East, including attacks linked to Yemen’s Iran-aligned Houthis and postponed Gulf-Iran talks, according to multiple market updates. That surge added to inflation worries and pushed the benchmark 10-year Treasury yield above the 5 percent level for the first time since October 2023 before it settled near 4.9895 percent, CNBC data showed. The yield increase has reinforced the dollar’s appeal relative to other currencies.
CME FedWatch tool figures placed the probability of a rate hike at roughly 93 percent, up sharply from levels seen a week earlier when expectations sat near 60 percent. Analysts expect the Fed’s updated economic projections and comments from Chair Kevin Warsh to carry more weight than the decision itself. An OCBC assessment found that near-term support for the dollar may continue but further gains would likely require signals of additional tightening ahead.
The US Dollar Index has reclaimed its 200-day simple moving average near 99.13 and now confronts resistance between 99.80 and the psychologically important 100 level, FXStreet technical analysis indicated. A double-bottom pattern around 98.50 has supported the recent recovery even as the index oscillates in a relatively tight range. Such technical developments coincide with broader risk aversion that has favored the greenback across several trading sessions.
Currency strategists at UBS noted that markets are now fully pricing in a Fed rate hike following recent consumer price data and the renewed rise in oil prices. Giovanni Staunovo, a UBS analyst, said renewed energy costs could reinforce inflation concerns and keep the Fed on a hawkish footing. The dollar has also gained against the yen, which slipped toward 155 per dollar ahead of the Bank of Japan’s own policy meeting scheduled for later in the week.
Commonwealth Bank of Australia currency strategist Carol Kong said a 25 basis-point increase is about 90 percent priced, implying the dollar will receive a modest boost if the Fed increases rates. She added that there is a small chance the dollar eases if the Fed hikes but Warsh plays down the risk of follow-up hikes in the press conference. In the event the Fed does not increase the funds rate, a steep fall in the dollar exceeding 1 percent could follow, according to the strategist.
