Hawkish Federal Reserve stance and stronger US economic data drive greenback surge as yen weakens to multi-month lows.
Image: Reuters
The US dollar climbed to its highest level in more than a year on Thursday after the Federal Reserve’s latest policy decision signaled a more hawkish outlook, strengthening expectations of a possible rate hike later this year.
The Federal Reserve held interest rates steady in the 3.50% to 3.75% range, but markets reacted strongly after nearly half of policymakers indicated support for a potential rate increase due to ongoing inflation pressures. Futures markets are now fully pricing in a rate hike by October, supported by stronger-than-expected US retail sales data.
The dollar index rose 0.36% to 100.71, its highest level since May 2025, extending gains from the previous session. Major currencies including the euro and British pound also weakened against the dollar amid shifting rate expectations.
In Asia, the Japanese yen fell to its lowest level since July 2024, prompting renewed warnings from Japanese officials about possible intervention to stabilize the currency. Meanwhile, the euro and sterling hit their weakest levels in more than two months.
Analysts say the dollar’s strength is being driven primarily by rising US interest rate expectations, which are outweighing geopolitical developments and softer oil prices in global markets.
