Dollar Hits Seven-Week High as Fed Raises Rates and Reaffirms Independence

The US dollar reached a seven-week high on Thursday after the Federal Reserve raised interest rates and reaffirmed its commitment to curbing inflation. The move was seen as hawkish, with Chair Kevin Warsh reasserting the central bank's independence despite repeated calls from President Donald Trump for lower borrowing costs.

According to Michael Pfister, a strategist at Commerzbank, 'the greatest danger for the U.S. dollar lies in the U.S. president increasing pressure on the Fed again in the coming weeks, which could lead to renewed doubts about the Fed’s independence.'

The dollar index climbed to 100.36, its strongest level since July 31, before easing slightly as oil prices extended their decline. The euro and yen also rose, with the euro reaching $1.1481 and sterling up 0.10% at $1.3395 ahead of the Bank of England's meeting.

The market is now focusing on the upcoming rate decisions from the Bank of Japan (BOJ) and the Bank of England (BoE), with investors expecting further interest rate hikes in Japan to signal its readiness to keep pushing up borrowing costs.