The US dollar index rose to 101.3 on Wednesday, retreating slightly from a 15‑month high of 101.6 reached earlier in the session, after Fed Chairman Warsh signaled that inflation risks have diminished. His comments were consistent with a decline in the ISM Manufacturing Prices Index, helped by lower energy costs, which reduced fears of multiple Fed rate hikes this year. Even so, most market participants still anticipated some degree of further policy tightening.
ADP data showed that the US private sector added nearly 100,000 jobs in June—slightly below expectations but still comfortably above this year’s average—leaving the Fed room to maintain a restrictive policy stance. The dollar also drew support from Warsh’s push to shrink the Federal Reserve’s balance sheet, a move that would constrain dollar supply and contribute to the unwinding of the earlier “dollar debasement” trade.
Meanwhile, expectations for European Central Bank rate hikes softened following weaker inflation data in the euro area, and a fiscally cautious stance in Japan weighed on the yen.
