Dollar Gains Modestly Ahead of Expected Fed Rate Hike
The U.S. dollar index (DX-Y.NYB) rose to a two-week high, gaining +0.09%, driven by stronger-than-expected August retail sales and expectations that the Federal Reserve will raise interest rates later in the day for the first time since 2023. The Fed is expected to increase its fed funds target range by 25 basis points to between 3.75% and 4.00%. However, higher stock prices have reduced demand for dollar liquidity, while a larger-than-expected drop in the September NAHB housing market index has weighed on the currency. The euro weakened slightly against the dollar as EUR/USD fell by -0.07%, though losses were limited due to weaker-than-anticipated declines in Eurozone industrial production and lower crude oil prices, which are supportive for European economies reliant on imported energy. Meanwhile, the yen slid to a one-week low against the U.S. currency amid weak Japanese economic data and concerns over rising defense spending. However, stronger trade figures from Japan provided some support. Markets remain focused on Fed Chair Warsh’s comments during the post-meeting press conference for further insight into future monetary policy.
Topics: dollar index federal reserve interest rates retail sales