Dollar gains after Fed keeps rates unchanged and yen weakens past 160
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NEW YORK, April 29 : The dollar strengthened against major currencies on Wednesday after the U.S. Federal Reserve left interest rates unchanged, with investors also on edge as the U.S.-Israel war with Iran shows little sign of easing.
The Fed’s 8–4 vote marked its most divided decision since 1992, underscoring the challenge incoming Fed Chair Kevin Warsh will face in pushing for rate cuts. Current Chair Jerome Powell’s term ends on May 15.
Speaking at a press conference, Powell said that despite dissent from four officials who opposed maintaining an easing bias, he does not see the Fed tilting toward raising interest rates.
The euro slipped 0.35 per cent to $1.167150, while sterling fell 0.36 per cent to $1.34705.
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"The main thing is that announcement revealed that there are three people thinking that we should be hiking interest rates or should not have an easing bias and that we should be worried about inflation," said Juan Perez, director of trading at Monex USA in Washington.
"Kevin Warsh seems a lot like Powell and is likely not going to be a dove. He's also not entering a Fed that is thinking of stimulus; they're actually thinking hawkishly. And then more importantly, in the global perspective, central banking has a lack of consensus, which is actually helping the U.S. dollar," Perez said.
The dollar rose 0.23 per cent to 0.7911 Swiss francs, while the dollar index gained 0.35 per cent to 98.938.
Markets are also eyeing decisions from major central banks including the European Central Bank and the Bank of England. Bank of Canada had on Wednesday kept its key interest rate unchanged.
U.S. President Donald Trump discussed how to mitigate the impact of a possible months-long U.S. blockade of Iran's ports with U.S. oil companies, a White House official said on Wednesday.
Oil prices climbed for an eighth straight session — the longest run since May 2022, following Russia’s invasion of Ukraine — with the front-month June contract, which expires on Wednesday, rising 6 per cent to settle at $118.03 a barrel.
"Oil prices moved higher based on latest developments; and when oil prices move, yields tend to move higher and at the same time long-term inflation expectations haven't moved," said Axel Merk, president and chief investment officer at Merk Investments in Palo Alto, California.
"Taking it together, this is a tightening of financial conditions and a raising of real interest rates, which is supportive for the dollar - meaning all else being equal that weakens other currencies," he said.
YEN INTERVENTION WATCH
The yen weakened above 160 per dollar, edging closer to levels that have previously triggered intervention, despite the Bank of Japan signaling after its policy meeting on Tuesday that it could raise rates in coming months.
The Japanese currency has fallen about 0.6 per cent against the dollar and more than 2 per cent since the war began, partly reflecting Japan’s vulnerability to higher imported energy costs.
"The trade-weighted yen has reached its lowest level since the early 1990s, and the MoF (Ministry of Finance) has become increasingly vocal about yen weakness, emphasizing the administration’s readiness to respond and “close coordination with the US” on the currency. Naturally, these developments have prompted renewed concerns of imminent intervention," Goldman Sachs analyst Karen Fishman said in an investor note.
The yen was last down 0.49 per cent at 160.40 per dollar and down 0.12 per cent at 187.22 per euro.
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