Dollar Eases After Fed Hike as Markets Eye BoJ Rate Decision

The US Dollar experienced a slight dip on Thursday after the Federal Reserve raised interest rates for the first time since 2023, reaching a seven-week high earlier in the week. The US Dollar Index (DXY) hovered just above 100.00 but turned rangebound after the hike as energy prices retreated and President Donald Trump renewed calls for sharply lower rates.

Markets are now looking to Friday's agenda, led by the Bank of Japan's potential rate hike. Meanwhile, a firmer risk appetite was reflected in a sharp rally in gold and a steadier tone in equities. Gold surged above $4,350 per troy ounce, extending its run.

The EUR/USD pair held modest gains in the high-1.1400s on the softer Dollar, while GBP/USD remained in the mid-1.3300s following the Bank of England's cautious hold. USD/JPY drifted towards 156.00 as traders positioned for a widely expected BoJ rate hike.

According to VT Markets, derivative traders should position for a stronger US Dollar in the coming weeks despite its temporary slip. The company recommends buying call options on the Dollar Index (DXY) due to historically high support for the greenback during Fed hiking cycles.