Dollar Rallies on Fed Decision Amid Ongoing Tensions

The US dollar rebounded on Thursday after the Federal Reserve maintained its policy rate unchanged in response to recent air strikes in Iran.

The Dollar Index, which tracks the greenback against six major currencies, rose by 0.1% to 100.93, offsetting earlier weakness that had taken it to a July 20 low following the Fed's decision.

The British pound declined by 0.2% ahead of the Bank of England's rate decision, while the euro slipped 0.1%. The Australian and New Zealand dollars held steady and firmed respectively, but the yen remained little changed at 163.465 per US dollar.

Market analysts were cautious about the Fed's decision, with IG market analyst Fabien Yip noting that Chair Kevin Warsh had given 'vague guidance' ahead of the Bank of England rate decision, echoing the tone struck in June. This reluctance to commit to further tightening was beginning to unsettle investors, raising questions about whether the Fed can keep long-term inflation expectations anchored.