The U.S. dollar regained stability in early Asian trading on Thursday after the Federal Reserve kept interest rates unchanged. At the same time, reports of U.S. air strikes in Iran increased demand for the dollar as a safe-haven currency.

Dollar Supported by Geopolitical Risk

The U.S. Dollar Index rose around 0.1% to 100.89, after previously falling to its lowest level since July 20 following the Fed’s policy decision.

Several major currencies weakened slightly:

• GBP/USD fell 0.1% to 1.3355

• EUR/USD declined 0.1% to 1.1457

• AUD/USD remained steady near 0.6959

• NZD/USD held around 0.5795

• USD/JPY was little changed at approximately 163.455

The British pound also came under pressure ahead of the Bank of England’s interest-rate decision, with markets largely expecting no change in policy.

Fed Holds Rates but Offers No Clear Direction

Although three committee members supported a rate increase in July, Fed Chair Kevin Warsh did not signal that another hike was imminent.

This lack of clarity has raised concerns that the Fed may not be acting aggressively enough to keep long-term inflation expectations under control. The bond market reacted sharply, with the yield on the 30-year U.S. Treasury rising to its highest level in nearly two decades.

According to the FedWatch tool, the implied probability that the Fed will keep rates unchanged at its meeting ending on September 16 rose to 42.6%, up from 24% before the latest meeting.

Markets Remain Cautious

Some analysts continue to expect the Fed to leave interest rates unchanged. However, the central bank’s unclear policy guidance could trigger a negative market reaction later, particularly if inflation remains elevated.

Meanwhile, tensions involving Iran are supporting the dollar in the short term, partly offsetting pressure from the uncertain monetary-policy outlook.

Cryptocurrencies Edge Higher

Bitcoin rose 0.3% to $63,650.06, while Ether gained 0.7% to $1,896.66.

Conclusion

The U.S. dollar is currently being supported by heightened geopolitical risks following U.S. air strikes in Iran. However, its medium-term outlook will depend on the Fed’s ability to control inflation and provide clearer guidance on the future path of interest rates.

This content is intended solely to share market information and analysis. It does not constitute investment advice.

Source: Reuters