US Dollar Index Plunges 1.69% Amid Dovish Fed Stance

The US dollar index declined by 1.69% last week after the Federal Reserve held interest rates steady, leading to a dovish market interpretation that narrowed the dollar's yield advantage.

The non-dollar currencies generally rebounded, but exhibited divergent movements: the yen led in volatility due to the first joint U.S.-Japan intervention since 2011 and rising expectations of a Bank of Japan rate hike; the euro and British pound rose passively alongside dollar weakness, though the euro was weighed down by Europe's extreme heat crisis.

The Australian dollar benefited from reduced geopolitical risk sentiment. Market focus this week centers on the US nonfarm payrolls data, while non-dollar currencies will be influenced by developments in yen intervention and central bank policy trajectories.