Dollar climbs to two-month peak as Fed hawkishness drives markets
The U.S. dollar rose to its strongest level in eight weeks on expectations of further Federal Reserve tightening, while the euro and pound slipped and oil prices hovered near $100 a barrel.
On Wednesday the U.S. dollar climbed to a two-month peak, spurred by expectations that the Federal Reserve may raise rates again if price pressures persist. The euro slipped to its lowest point since late July, trading around $1.142, while the British pound fell to roughly $1.3305. The dollar index rose modestly to 100.79.
Oil prices rebounded above $99 a barrel, ending a five-day decline, and have surged since the February-started Middle East conflict, keeping inflation worries high. ING strategist Francesco Pesole said the Fed story remains dominant, and MUFG analyst Michael Wan warned that oil in the $90-100 range is unlikely to trigger a dovish shift. The Japanese yen stayed near 157.8 per dollar after the Bank of Japan’s 31-year-high rate hike, with analysts watching for possible intervention.
Why it matters
It shows how Fed expectations and volatile oil prices are shaping major currency values worldwide.
How this story developed
- Sep 3 European gas prices hit three-year high as winter energy outlook grows bleak
- Sep 12 Rough’s production licence is set to expire in April, ending extraction at the site.
- Sep 17 In its first rate increase since 2023, the Fed lifted the policy rate by a quarter point to a 3.75-4.00% range, with every governor supporting the decision. Market participants interpret the action as a more hawkish stance, prompting concerns for rate-sensitive assets such as small-cap stocks. The lack of clear forward guidance from new chair Kevin Warsh adds to uncertainty, while forecasts point to at least one additional hike this year and a pause in 2027.
- Sep 20 The Fed implemented a modest rate increase and a hawkish tone from the new chair.
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