Dollar Tumbles After FOMC Keeps Rates Unchanged Amid Global Tensions

The US dollar fell to a one-week low after the Federal Open Market Committee (FOMC) kept interest rates unchanged. The FOMC, in a 9-3 vote, maintained its fed funds target range at 3.50% to 3.75%. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan voted for a quarter-point rate hike.

The post-FOMC statement acknowledged 'elevated uncertainty' due to the conflict in the Middle East, but noted that economic activity is expanding at a solid pace. Inflation remains elevated, partly due to supply shocks, including energy price increases.

Crude oil prices surged over 6% after President Trump said the US would 'hit Iran hard' following an attack from Iran on a US base in Jordan. This jump raised inflation expectations and could prompt central banks to tighten monetary policy, supporting the dollar. However, the FOMC's decision not to hike rates sent the dollar tumbling.

The euro rallied to a 1.5-week high, finishing up by +0.60%, as investors sought safe-haven assets after the FOMC kept interest rates unchanged. The yen also rose, benefiting from increased risk aversion and safe-haven demand.