Key Takeaways
- Dollar index steady at 102.23, close to its strongest level since April 2025.
- FOMC minutes indicate inflation risks remain a major concern for policymakers.
- Market expects no interest rate hike at next Federal Reserve meeting.
The dollar held near its strongest level in a year-and-a-half in subdued trading at the start of the Asian session on Thursday, after hawkish minutes from the Federal Open Market Committee (FOMC) signaled policymakers at the US central bank viewed inflation as the biggest risk to their outlook.
The dollar index, which measures its strength against a basket of six currencies, was steady at 102.23 after rising 0.3% on Wednesday. This level is close to its strongest since April 9, 2025, following the market turmoil that accompanied the so-called Liberation Day tariff announcement the previous week.
Federal Reserve policymakers voted unanimously to raise interest rates by a quarter of a percentage point at the US central bank’s September 15-16 meeting, but minutes released Wednesday indicated divisions over their rationale for doing so. Westpac analysts wrote, 'The FOMC’s minutes reinforced the hawkish tone accompanying the Fed’s September rate hike, with most participants still viewing further tightening as appropriate and almost all seeing inflation risks tilted to the upside at the time of the meeting.'
Despite the hawkish tone, market expectations remain unchanged. Fed funds futures are pricing an implied 19% probability of a 25-basis-point hike at the US central bank’s next two-day meeting ending Oct 28, unchanged from a day earlier, according to the CME Group’s FedWatch tool.
Against the yen, the US dollar was down 0.2% at 157.815 yen after data released on Thursday showed Japan’s current account surplus stood at 4.062 trillion yen ($25.7 billion) in August, higher than economists’ median forecast for a surplus of 3.19 trillion yen.
The Australian dollar and its kiwi counterpart were both flat at $0.6960 and $0.5600 respectively. Against the Chinese yuan, the US dollar was flat at 6.7015 yuan in offshore trade. The euro was flat at $1.1201, while the British pound was also unchanged at $1.3215.
In other currency markets, Bitcoin slipped 0.2% to $83,233.40 while ether nudged 0.1% lower to $2,571.07.
