Dollar steadies after U.S. central bank meeting

The dollar index and dollar index futures steadied near two-week highs in Asian trade, maintaining overnight gains after the U.S. central bank’s decision

The dollar steadied in Asian trade on Thursday, remaining upbeat after the U.S. central bank’s latest meeting showed a growing hawkish bias in the central bank.

This notion weighed on some Asian currencies, with the yen moving past the key 160 yen level against the dollar, while the Indian rupee plunged to record lows.

The yuan was flat after mixed purchasing managers index data, while most other Asian units moved in a flat-to-low range as reports of more potential action in Iran-U.S. war left markets on edge.

The dollar index and dollar index futures steadied near two-week highs in Asian trade, maintaining overnight gains after the U.S. central bank’s decision.

The central bank left interest rates unchanged as widely expected, but its decision was far from unanimous– with some policymakers dissenting against language over an easing bias, citing rising concerns over elevated inflation and the impact of the war on Iran.

The move indicated that more members of the central bank’s rate-setting board were growing concerned over inflation, especially as energy prices rose in the wake of supply disruptions caused by the Iran war.

Brent oil crossed $120 a barrel on Thursday and was at its highest level since the 2022 Russia-Ukraine crisis, amid signs of a continued deadlock between Iran and the U.S.

Wednesday’s meeting was the central bank’s last under Chair Jerome Powell, who said he will step down from the role in May, but will stay on as Governor in the central bank.

The yen’s USD/JPY pair pushed further past 160 yen on Thursday, putting the pair back at levels that had attracted currency market intervention in the past.

While the Bank of Japan did strike a hawkish chord earlier this week, markets were unconvinced that more rate hikes were coming in the near-term.

The Indian rupee was a major underperformer, with the USD/INR pair adding 0.5% and hitting a record high of 95.322 rupees to the dollar. The rupee largely unwound all gains made in the wake of Reserve Bank measures to support the currency, with surging oil prices being a major weight on the currency.

The yuan’s USD/CNY pair was unchanged after purchasing managers index data showed steady growth in the manufacturing sector, but that non-manufacturing activity shrank in April.

The won’s USD/KRW pair dropped 0.3%, with the currency taking mild support from strong retail sales data for March. Industrial production also grew slightly more than expected from the prior month.

The Singapore dollar’s USD/SGD pair was flat, while the Taiwan dollar’s USD/TWD pair advanced 0.2%.