Hawkish Fed lifts dollar to seven-week high; markets brace for BOE, BOJ

The dollar reached a seven-week high on Thursday following the Federal Reserve's decision to raise interest rates and signal further hikes ahead. Traders focused on the potential responses from the Bank of England and Bank of Japan to inflation concerns. New Fed chief Kevin Warsh played a pivotal role in the rate hike decision, surprising markets with his more hawkish stance.

Warsh's guidance on future rate increases contributed to the dollar's appreciation. The euro weakened slightly against the dollar, while the British pound remained stable ahead of the Bank of England's meeting. The Japanese yen hovered near a two-week low, awaiting the Bank of Japan's decision on Friday. The dollar index reached its strongest level since mid-July 31, with Treasury yields flattening after the Fed's decision.

Despite the Fed's move, some analysts remain skeptical of a sustained USD uptrend, viewing it as a response to inflation risks from other central banks. Markets will now turn their attention to the Bank of England and Bank of Japan, which are expected to maintain or raise interest rates later in the week, impacting the yen's value and market sentiment.