Dollar edges back from 18-month high after FOMC minutes

On Thursday, the dollar edged back from its 18-month high following hawkish minutes from the Federal Open Market Committee (FOMC) released on Wednesday. These minutes highlighted policymakers' view that inflation posed the greatest risk to the central bank's outlook. The dollar index, which measures the greenback's strength against a basket of six currencies, remained steady at 102.23, having climbed 0.3% the previous day.

The US dollar has been hovering near its strongest levels since April 9, 2025, following the market turbulence caused by the "Liberation Day" tariff announcement in the preceding week. At the Fed's September 15-16 meeting, policymakers unanimously voted to raise interest rates by a quarter of a percent. However, the FOMC minutes disclosed disagreements among participants regarding the justification for this decision.

According to Westpac analysts, "the FOMC's minutes strengthened the hawkish tone accompanying the Fed's September rate hike, with most participants still perceiving further tightening as necessary and nearly all identifying upside inflation risks at the time of the meeting." The minutes did not significantly alter expectations that the Fed would refrain from further rate hikes at its upcoming meeting.

Fed funds futures suggest a 19% probability of a 25-basis-point increase at the Fed's next two-day meeting on October 28, unchanged from the day prior. The US dollar weakened against the Japanese yen, falling 0.2% to 157.815 yen, while data unveiled on Thursday indicated Japan's current account surplus for August at 4.062 trillion yen ($25.7 billion), surpassing economists' forecast of a 3.19 trillion yen surplus.

Oil prices surged due to ongoing Middle East supply concerns stemming from shipping attacks. The Australian dollar and New Zealand dollar were both flat at $0.6960 and $0.5600, respectively. Against the Chinese yuan, the US dollar remained unchanged at 6.7015 yuan. The euro and British pound also exhibited no change, settling at $1.1201 and $1.3215, respectively. Bitcoin declined by 0.2% to $83,233.40, while Ether decreased slightly by 0.1% to $2,571.07.