The dollar held near session highs on Wednesday after Federal Reserve minutes gave policymakers no reason to shift their rate outlook. EUR/USD slid to a 17-month low as the dollar index advanced, with surging oil prices and rising Treasury yields adding further support to the greenback.
The U.S. Dollar Index climbed 0.4% to 102.15, recouping earlier intraday losses. Benchmark 10-year Treasury yields rose three basis points to 5.31% over the same session.
Fed minutes reinforce higher-for-longer outlook
Minutes from the September Federal Reserve meeting showed most policymakers see another interest rate hike by the end of this year. That meeting had seen the Federal Open Market Committee unanimously raise the federal funds rate by 25 basis points to a range of 3.75%-4.00%, its first increase in over three years. The Fed's updated dot plot also showed a majority of policymakers anticipating at least one more hike this year.
The dollar's upward momentum was reinforced further as Brent crude surged past $101.50 a barrel after intensified drone and missile strikes by Iran-backed forces against shipping in the Strait of Hormuz.
Euro pinned near 17-month low
EUR/USD fell 0.4% to $1.1217, remaining trapped near its 17-month low. Against the British pound, the euro touched a 16-month low at 0.8456 as persistent worries over France's expanding budget deficit and Spanish political gridlock weighed on continental risk sentiment.
Nicholas Kennedy, FX strategist at Lloyd's Bank, said the dollar's advance has room to extend, citing "financial conditions still looking relatively easier in the US than Europe", and added that Europe appears more exposed to ongoing supply-side risks.
Yen and rupee also under pressure
The Japanese yen slipped 0.2% to 158.38 per dollar. An incoming Bank of Japan board member voiced support for multi-stage rate increases, but potential fiscal expansion continued to dilute support for the currency.
Elsewhere, the Indian rupee fared worse still, sliding 0.5% to test all-time lows around 96.84 per dollar despite the Reserve Bank of India delivering a widely anticipated 25-basis-point hike that brought its repo rate to 5.50%, its first increase since early 2023. Currency desks noted the hike was already priced in and offered little defense against triple-digit crude prices and capital outflows from emerging-market debt.
Source: Investing.com
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