Dollar edges back from 18-month high after FOMC minutes

The dollar held near its strongest level in a year-and-a-half in subdued trading at the start of the Asian session on Thursday, after hawkish minutes from the Federal Open Market Committee signalled policymakers at the US central bank viewed inflation as the biggest risk to their outlook.

The dollar index, which measures its strength against a basket of six currencies, was steady at 102.23 after rising 0.3% on Wednesday. The greenback remains within a few pips of its strongest levels since April 9, 2025, following the market turmoil that accompanied the so-called Liberation Day tariff announcement the previous week.

Federal Reserve policymakers voted unanimously to raise interest rates by a quarter of a percentage point at the US central bank’s Sept15-16 meeting, but minutes released Wednesday indicated divisions over their rationale for doing so.

“The FOMC’s minutes reinforced the hawkish tone accompanying the Fed’s September rate hike, with most participants still viewing further tightening as appropriate and almost all seeing inflation risks tilted to the upside at the time of the meeting,” Westpac analysts wrote.

The minutes did little to shift expectations that the Fed will refrain from hiking at its meeting later this month. Fed funds futures are pricing an implied 19% probability of a 25-basis-point hike at the US central bank’s next two-day meeting ending Oct 28, unchanged from a day earlier, according to the CME Group’s FedWatch tool.

Against the yen, the US dollar was down 0.2% at 157.815 yen after data released on Thursday showed Japan’s current account surplus stood at 4.062 trillion yen (US$25.7 billion) in August, higher than economists’ median forecast for a surplus of 3.19 trillion yen.

The Australian dollar and its kiwi counterpart were both flat at US$0.6960 and US$0.5600 respectively.

Against the Chinese yuan, the US dollar was flat at 6.7015 yuan in offshore trade.

The euro was flat at US$1.1201, while the British pound was also unchanged at US$1.3215.

Bitcoin slipped 0.2% to US$83,233.40 while ether nudged 0.1% lower to US$2,571.07.