US Dollar Stuck in Neutral as Central Banks Raise Interest Rates
The US dollar has been stuck in a holding pattern for a month, hovering around the same level. The Dollar Index (DXY) sits near 99, with the Federal Reserve keeping rates at 3.50%, 3.75%. August producer inflation hit 5.4% year-on-year, and the US added 162,000 jobs last month.
Other central banks are also moving to raise interest rates. The European Central Bank raised its deposit rate to 2.50%, while the Bank of Japan is expected to lift rates to 1.25%. This has helped strengthen the yen from almost 164 per dollar in July to around 155.
The US dollar's value is being held back by a roughly $1.8 trillion deficit through the first 10 months of fiscal 2026. A weaker dollar makes imports and foreign travel more expensive, while a stronger dollar can ease imported inflation.