The dollar index hovered around 99.5 on Wednesday after two straight sessions of losses, as investors waited for the latest Federal Reserve policy decision. The central bank is widely expected to keep interest rates unchanged, with traders closely watching Fed Chair Jerome Powell for guidance on how volatility in the oil market may influence the policy outlook.
Rising oil prices have heightened inflation concerns, while mixed signals from the labor market have offered little clarity on the future path of interest rates. Markets do not expect the Fed to begin easing until at least September or October, and are currently pricing in only one rate cut for this year.
At the same time, Iran has escalated attacks on energy infrastructure in the Middle East, while US allies have rejected President Donald Trump’s call to help secure commercial shipping through the Strait of Hormuz. The dollar has declined against all major currencies this week, with its steepest drop versus the Australian dollar after the Reserve Bank of Australia delivered back-to-back interest rate hikes.
