Dollar edges back from 18-month high after FOMC minutes

The dollar index, a measure of the US greenback against six major currencies, remained relatively stable at 102.23 following a 0.3% increase on Wednesday. In subdued trading on Thursday, the dollar hovered close to its strongest level in over 18 months, as hawkish minutes from the Federal Open Market Committee (FOMC) suggested that US policymakers viewed inflation as the most significant risk to their outlook.

The dollar index, which tracks its strength relative to six currencies, was steady at 102.23 after climbing 0.3% on Wednesday. The greenback is within a few pips of its highest level since April 9, 2025, after market upheaval caused by the so-called Liberation Day tariff announcement earlier in the week. At the Federal Open Market Committee's (FOMC) Sept 15-16 meeting, policymakers unanimously voted to raise interest rates by 0.25%, yet the released minutes showed differences in their rationale for this decision, according to Westpac analysts.

The FOMC's minutes reinforced a hawkish tone accompanying the Fed's September rate hike, with most participants still expecting further tightening and nearly all seeing upside risks in inflation at the time of the meeting, wrote Westpac analysts. The FOMC's minutes did little to alter expectations that the Fed would not increase rates at its upcoming meeting.

Fed funds futures indicate a 19% probability of a quarter-point hike at the Fed's next two-day meeting on October 28, unchanged from the previous day, as per the CME Group's FedWatch tool. The US dollar weakened against the Japanese yen, falling 0.2% to 157.815 yen following Japanese data showing the country's current account surplus at 4.062 trillion yen (US$25.7 billion) in August, surpassing economists' median forecast of a surplus of 3.19 trillion yen.

The Australian and New Zealand dollars were both flat at US$0.6960 and US$0.5600, respectively. The US dollar was also unchanged against the Chinese yuan at 6.7015 yuan in offshore trade. The euro and British pound remained steady at US$1.1201 and US$1.3215, respectively. Bitcoin dropped 0.2% to US$83,233.40, while ether fell 0.1% to US$2,571.07.