Dollar Stays Strong as Markets Price in Another Rate Hike

The US dollar remains strong as markets anticipate another interest rate hike from the Federal Reserve. The dollar index has traded above 100.5, nearing its highest level since July. This strength is largely attributed to the Fed's recent decision to raise rates by 25 basis points to 3.75%-4.00%, signaling a continued fight against inflation.

The market is pricing in another rate increase in October, with the probability rising from 43.5% last week to 56%. This expectation of higher rates has made dollar deposits and short-term US Treasuries more attractive to investors, supporting the dollar's strength.

Meanwhile, oil prices have declined, falling to around $91 per barrel for WTI crude on September 22, and Brent crude trading below $100. The easing oil prices could reduce inflationary concerns, but may not be enough to counterbalance the Fed's hawkish stance.