Dollar Hangs Tight as Markets Eye BOJ Decision

The US dollar held onto its seven-week high on Thursday following the Federal Reserve's interest rate hike and signal for more tightening to come. The greenback had surged against the euro on Wednesday after the Fed raised rates, but it eased back down by 0.1% on Thursday as the euro rose to $1.14755.

The dollar index was flat at 100.23, while Treasury yields and oil prices moderated, contributing to a pullback in the greenback's value. Marc Chandler, chief market strategist at Bannockburn Forex, attributed the dollar's movement to its correlation with US interest rates, stating 'the dollar moves along with US interest rates right now.'

The Fed may have delivered on hawkish expectations for now, but it might still not raise rates as aggressively as markets anticipate, making the dollar vulnerable to any disappointment. Investors are pricing in more than one additional rate hike this year and roughly three by the end of 2027, whereas policymakers project only one more increase in 2026 and a hold in 2027.