The U.S. dollar remained relatively stable near its highest level in four weeks on the trading day, hovering around 101.50 on the dollar index, which tracks the greenback against a basket of major currencies. The euro edged up to $1.1370, while the dollar held at 163.745 against the yen and sterling climbed to $1.330.
Market participants focused heavily on expectations surrounding a potential Federal Reserve interest rate decision scheduled for the following day. The repricing of Fed expectations had been pronounced in preceding months, driven by Treasury yield increases since April, geopolitical tensions involving U.S.-Iran conflict concerns, and recent hawkish commentary from Fed Chair Kevin Warsh. Market pricing indicated roughly a 40% probability of a 25-basis-point rate increase, substantially elevated from about 20% a week earlier. Additionally, traders assigned nearly a 95% probability to a rate hike occurring by September. Analyst commentary noted the powerful influence of U.S. Treasury yields on currency movements, while also cautioning that excess conviction around near-term tightening could create vulnerability if monetary policy messaging proved more dovish than expected. Data showed net long dollar positions had reached their highest level since 2015.
Across other major currency pairs, the Australian dollar weakened 0.3% to $0.697 following remarks from the nation’s central bank chief regarding persistent underlying inflation. The New Zealand kiwi traded at $0.5772. Central bank activity dominated the week’s agenda, with the Bank of England and Bank of Japan expected to maintain current interest rate settings at respective meetings while adopting cautious stances on price pressures. Japan’s currency remained under pressure, having reached 40-year lows the previous week, prompting continued speculation about potential official intervention. Japanese officials indicated readiness to respond to excessive currency movements.
In digital assets, bitcoin declined 2.3% to $63,414.16, while ether fell 3.4% to $1,879.71, marking its largest monthly percentage decrease.
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