Dollar Rises Above 100 Mark as Fed Hikes Interest Rates
The U.S. Dollar Index rose for the sixth consecutive session and breached the 100 mark due to the Federal Reserve's decision to raise interest rates by 25 basis points to 3.75%-4.00%. Chairman Kevin Warsh emphasized that inflation remains 'too high' and could lead to further rate hikes if it persists.
The market is pricing in a 49.8% probability of another rate hike at the October meeting, according to the CME FedWatch Tool. This has led to the dollar's interest rate advantage increasing, causing it to rise against major currencies such as the euro, pound sterling, yen, and others.
The dollar's strength is expected to continue if the economy remains resilient and inflation stays above policy targets. However, if initial jobless claims rise significantly or economic data shows signs of cooling, expectations for further rate hikes may be recalibrated, potentially subjecting the dollar to a technical correction.