Key facts
- The dollar held steady ahead of the Federal Reserve's policy decision under new Chair Kevin Warsh.
- Investors anticipate the Fed will hold rates steady but are scrutinizing for hawkish signals on inflation.
- The Bank of Japan raised its benchmark rate to 1%, its highest in 31 years, signaling further tightening.
- The yen traded near levels that traders consider a red zone for potential currency intervention.
- Optimism over an interim U.S.-Iran peace deal reduced demand for the safe-haven dollar.
- Investors are increasing bullish dollar bets, signaling renewed confidence in the U.S. economy.
The dollar held steady against most major peers on Wednesday ahead of the Federal Reserve's first policy decision under Chair Kevin Warsh, a meeting that could introduce volatility as investors adjust to a new approach to monetary policy and communication. The euro was flat at $1.1605, while the pound softened slightly against the dollar and euro following cooler-than-expected UK inflation data. The Federal Reserve is widely expected to maintain its current interest rates at Warsh's debut meeting, but markets will scrutinize the accompanying statement, economic projections, and news conference for any indications of a shift away from an easing bias due to growing inflation risks. Money market pricing reflects an approximately 80% chance of a Fed rate hike this year. Optimism regarding an interim U.S.-Iran peace deal has reduced demand for the dollar as a safe-haven asset. The Bank of Japan raised its benchmark rate to a 31-year high of 1% but offered few clues on the timing of future hikes. The yen remained near levels that could prompt intervention from Japanese authorities. Sweden's crown weakened after the Riksbank kept its policy rate unchanged, citing mixed inflationary pressures and economic activity.