Dollar Holds Steady, Yen Surges on BOJ Tightening Expectations

The US dollar has maintained its seven-week high after the Federal Reserve's recent rate hike, but it has eased off slightly as foreign exchange desks adjust their portfolios. The greenback is now holding virtually flat around 100.17 against a basket of six major currencies.

The Fed's decision to increase its benchmark policy rate by 25 basis points to 3.75%-4.00% was seen as a hawkish move, but it reassured markets that the central bank remains committed to controlling energy-driven inflation expectations. Rate futures now indicate a 90% probability of another quarter-point increase before year-end.

The Japanese yen has outperformed other major currencies, advancing 0.3% as traders build in bets for a landmark policy shift from Tokyo. The Bank of Japan is widely expected to raise its interest rate by 25 basis points on Friday to 1.25%, marking the highest level in 31 years.

The British pound has held steady around $1.3400, near a six-week low, ahead of the Bank of England's decision to hold or hike its benchmark bank rate. Governor Andrew Bailey's forward guidance is closely watched by sterling allocators, who are searching for any signal that the BoE may follow the Fed and ECB with an autumn rate hike.