US Dollar Holds Steady Amid Fed Hawkishness and Middle East Tensions

The US dollar index remained steady at 102.23 on Thursday, maintaining levels near its strongest since April 2025. This stability follows the release of minutes from the Federal Open Market Committee's September 15-16 meeting, which detailed a unanimous decision to raise interest rates by a quarter of a percentage point. While the minutes revealed internal divisions over the rationale for the hike, the overall tone remained hawkish, with most policymakers viewing inflation as a primary risk and further tightening as appropriate.

Market expectations for additional hikes remain low, with Fed funds futures pricing only a 19% probability of another increase at the October 28 meeting. Despite this, Asian currencies consolidated against the greenback in early trade on October 8. Safe-haven demand for the dollar persists, driven by rising tensions in the Middle East and a pickup in Iranian attacks on vessels in the Strait of Hormuz, which has kept Brent oil futures elevated.

In currency markets, the dollar dipped 0.2% against the Japanese yen after Japan reported an August current account surplus of 4.062 trillion yen, exceeding economist forecasts. Meanwhile, the dollar remained steady against the South Korean won and Singapore dollar, while the Australian dollar held flat.