FOREX-Dollar steady near 18-month high after Fed minutes flag inflation risks

The dollar held near ​its strongest level in 18 months in subdued ‌trading ​in Asia on Thursday, after hawkish minutes from the US Federal Open Market Committee signalled policymakers 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 102.25 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 ‌September 15-16 meeting, but minutes released on 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 yield on the US ⁠10-year Treasury bond was up 3 basis points at 5.303%. "The continued sell-off in US Treasuries is becoming an increasingly important driver for global markets," MUFG analysts wrote. "Should ⁠long-end yields rise further, market attention could shift towards the broader tightening in US financial conditions and whether policymakers begin to signal greater concern ​over Treasury-market conditions."

Still, the minutes did little to shift expectations that the Fed will stand pat at its meeting ⁠later this month. Fed funds futures are pricing an implied 81.7% probability the US central bank will keep rates on hold at its next two-day meeting ⁠ending October ​28, nudging up from 80.1% a day earlier, according to the CME Group's FedWatch tool. Against the yen, the US dollar was up 0.1% at 158.18 yen, reversing a short-lived dip after data released on Thursday showed Japan's current account surplus stood ⁠at 4.062 trillion yen ($25.7 billion) in August, higher than economists' median forecast for a surplus of 3.19 trillion yen.

The Australian dollar ⁠was down 0.1% at $0.6955, while its ⁠kiwi counterpart was flat at $0.5602. Against the Chinese yuan, the US dollar was flat at 6.7035 yuan in offshore trade.

The euro was up 0.1% at $1.1202, while the British pound was unchanged at $1.3212. Bitcoin ‌fell 1.3% to $82,360.17, ‌while ether was 0.8% lower at $2,554.41.