Markets interpret the Fed’s latest policy stance as less aggressive on inflation, weighing on the USD before a modest recovery.
The US Dollar Index (DXY) rose 0.27% to 100.23 in European trade Friday, halting a three-day slide. The index earlier hit a six-week low of 99.85 as investors reassessed the Federal Reserve’s commitment to further rate hikes.
The Fed held rates steady at 3.50%-3.75% Wednesday, aligning with expectations, but policymakers signaled concerns over persistent inflation. Analysts noted the Fed’s tone appeared softer, with markets concluding the central bank may rely on market-driven tightening rather than additional hikes.
ING analysts highlighted that the Fed’s messaging suggested outsourcing tightening to financial markets, reducing the urgency for rate increases. The shift in perception contributed to the dollar’s earlier decline before a partial rebound.