Dollar Recovers Amid US-Iran Tensions and Fed Uncertainty

The US dollar regained its footing in Asian trading on Thursday after the Federal Reserve decided to keep interest rates unchanged. The decision was made by the Fed's policy-setting committee, which had three members voting in favor of a July rate hike. Chair Kevin Warsh stopped short of indicating an imminent rate increase, echoing June's tone.

This lack of commitment is unsettling investors, said IG market analyst Fabien Yip. 'A Fed unwilling to commit to further tightening raises the question of whether it can keep long-term inflation expectations anchored,' he added.

The dollar index, which measures the greenback's strength against six currencies, rose 0.1% to 100.93 after the US said it was conducting air strikes in Iran. The British pound was 0.2% weaker at $1.3347 ahead of a Bank of England interest rate decision.

Treasury bonds reacted violently to the Fed's decision, with the 30-year yield climbing to its highest in almost two decades. Fed funds futures are pricing in a 34.9% probability that the central bank will hold its rate at its next two-day meeting ending September 16.