The dollar index hovered around 101.4 on Wednesday, trading at its highest level in more than a year as expectations for Federal Reserve rate hikes this year remained strong, while a technology-led selloff on Wall Street boosted demand for the safe-haven currency. At its latest policy meeting, Fed officials left interest rates unchanged but signaled increasing support for further tightening, while new Fed Chair Kevin Warsh reiterated his commitment to restoring price stability. Markets are now pricing in roughly a 70% probability of a rate increase in September, up sharply from 29.1% a week earlier. Investors are also looking ahead to this week’s PCE inflation report, the Fed’s preferred inflation gauge, for additional clues on the outlook for monetary policy. Meanwhile, progress in US-Iran peace negotiations has increased traffic through the Strait of Hormuz, easing strains in global energy markets and helping to reduce inflationary pressures.
