The U.S. dollar surged to its highest levels in two months on Wednesday as investors braced for the release of the September Consumer Price Index (CPI) report. The greenback continued its upward momentum after the release of the Federal Reserve’s September meeting minutes, which revealed that most policymakers supported a significant 50-basis point rate cut.
Despite the recent Fed minutes, traders remain cautious, as the robust nonfarm payroll data from last week has changed the market’s expectations regarding future rate cuts. Analysts believe the central bank may not continue to ease its policy as aggressively.
“The strong U.S. jobs report has been the main driver behind the dollar’s recent strength,” said Amo Sahota, executive director at Klarity FX in San Francisco. He added that Federal Reserve Chair Jerome Powell had to convince more committee members than expected to support the outsized rate cut.
Dallas Federal Reserve President Lorie Logan acknowledged the need for the September rate cut but hinted at favoring smaller cuts going forward, citing persistent inflationary risks and uncertainty over the economic outlook.
The dollar index, which tracks the greenback against a basket of six major currencies, rose 0.38% to reach 102.88, its highest since mid-August. The euro dropped to a two-month low of $1.094, down 0.36%, while the dollar climbed 0.72% against the Japanese yen to 149.26, its strongest since August 15.
Looking at the Federal Reserve’s next steps, traders see an 83% chance of a 25 basis point cut in the November meeting, according to LSEG calculations. The probability of a rate hold is currently at 17%.
Global economic concerns have also impacted currencies in the Asia-Pacific region. The Australian and New Zealand dollars weakened amid ongoing uncertainty about China’s economic policies. The Aussie fell 0.43% to $0.6716, while the New Zealand dollar, also known as the kiwi, plunged 1.32% to $0.6057 following a surprise 50-basis point rate cut by the Reserve Bank of New Zealand.
Marc Chandler, chief market strategist at Bannockburn Global Forex, noted that markets are closely watching China’s next move after the finance ministry announced a press conference scheduled for Saturday, which has fueled expectations of potential new stimulus measures.
In other markets, the Swiss franc weakened 0.42% against the dollar, hitting 0.86, while the British pound dipped 0.25% to $1.3071, marking its lowest point since mid-September.
Meanwhile, in the cryptocurrency space, Bitcoin fell 1.60% to $61,348.93, and Ethereum dropped 0.81% to $2,422.42, reflecting broader risk-off sentiment across digital assets.
Investors now turn their attention to Thursday’s CPI report, which could further influence the Federal Reserve’s policy decisions in the coming months.
