Dollar Soars to Three-Month High as Fed Hikes Rates Again
The Federal Reserve's decision to raise interest rates has sent shockwaves through global markets, boosting the dollar to its strongest weekly performance since June.
On September 16, the FOMC voted unanimously to increase the federal funds rate by 25 basis points, pushing the target range to 3.75-4.00%. This marks the first rate hike in more than three years, and Fed Chair Kevin Warsh emphasized that it may not be the last.
The Bloomberg Dollar Spot Index climbed approximately 1.1% in the week through September 18, its strongest weekly showing since June. Futures markets have quickly recalibrated, pricing in an about 87% probability of yet another quarter-point hike by December.
A stronger dollar is the most immediate market consequence, and it showed up fast. Higher US rates make dollar-denominated assets more attractive relative to alternatives in Europe, Japan, and emerging markets, according to analysts at JPMorgan, Standard Chartered, and Brown Brothers Harriman.