FX.co ★ Dollar Hovers at a One-Year High

The dollar index traded around 100.8 on Friday, hovering near one-year highs as expectations of higher interest rates continued to bolster the currency following a hawkish signal from the Federal Reserve. The Fed left rates unchanged, as anticipated, but indicated rising support for tighter policy later this year. Around half of FOMC members now foresee at least one rate increase in 2026.

New Fed Chair Kevin Warsh declined to offer explicit guidance on the timing of the next move but stressed that inflation has been running above the 2% target for several years, reaffirming the Fed’s commitment to restoring price stability. Markets are currently pricing in roughly a 50% probability of a 25 bp hike in September.

Geopolitical risks also resurfaced after US–Iran talks scheduled for Friday in Geneva were cancelled. Reports of reduced traffic through the Strait of Hormuz added to upward pressure on oil prices. Over the week, the dollar gained about 1.1%.