Dollar Soars on Yen Weakness and Crude Oil Price Bump
The dollar index DXY reached a 7-week high today, gaining +0.24%. The yen's weakness played a significant role in this surge, as it fell to a 2-week low against the dollar.
A 1% jump in WTI crude oil prices also boosted inflation expectations and may prompt the Fed to tighten monetary policy further, which is bullish for the dollar.
This carryover support comes from Wednesday's FOMC rate hike of 25 basis points and the signal of another rate increase by the end of the year. However, the dollar declined slightly after US August manufacturing production unexpectedly fell -0.3% month-over-month, its largest decline in 10 months.
The yen's losses accelerated today despite the BOJ raising interest rates by 25 basis points to 1.25%. This decision was made in a 7-2 vote, with two members dissenting and preferring no change in interest rates.