US Dollar Index rises to near 98.50 as FOMC Minutes hint at pausing rate cuts
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is extending its gains for the second successive session and trading around 98.30 during the Asian hours on Wednesday.
Federal Open Market Committee (FOMC) December Meeting Minutes, released on Tuesday, revealed a deeply divided committee, with most participants judging that it would likely be appropriate to stand on further rate cuts if inflation declined over time. Meanwhile, some Fed officials said it might be best to leave rates unchanged for a while after the committee made three rate reductions this year to support the weakening labor market.
The DXY is on track for its largest annual decline of nearly a 9.5%, reflecting a turbulent period that began with US President Donald Trump’s chaotic rollout of tariffs. The US Dollar remains under pressure amid expectations of two additional Federal Reserve rate cuts in 2026, which would narrow interest-rate differentials with other major peers.
Moreover, concerns over fiscal deficits and the Fed’s independence put downward pressure on the Greenback. Traders are also closely watching the appointment of a new Fed Chair, with Trump expected to name Jerome Powell’s successor early next year.
The CME FedWatch tool shows an 85.1% probability of rates being held at the Fed’s January meeting, up from 83.4% a day earlier. Meanwhile, the likelihood of a 25-basis-point rate cut has fallen to 14.9% from 16.6% a day ago.
The Fed lowered interest rates by 25 basis points (bps) at the December meeting, bringing the target range to 3.50%–3.75%. The Fed delivered a cumulative 75 bps of rate cuts in 2025 amid a cooling labor market and still-elevated inflation.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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