Dollar Jumps to 8-Week High as Fed Rate-Hike Bets Outweigh Lower Oil Prices

By Renae Dyer

The dollar rose to its highest level since late July against a basket of currencies Wednesday as markets bet on the Federal Reserve raising interest rates further.

The Fed lifted rates by 25 basis points last week and pointed to at least one further increase this year, strengthening the dollar as market rate-hike expectations continue to rise.

The dollar appreciated even as Brent crude prices stayed below $100 a barrel, at $99.25, on hopes for diplomacy in the Middle East conflict. Such developments would normally be negative for the dollar due to its safe-haven status and America's position as a net oil exporter.

The dollar has extended gains since the Fed's decision, taking the DXY index--which measures the dollar's value against a basket of currencies--to an eight-week high of 100.862 in early European trade Wednesday. The euro and sterling both hit eight-week lows of $1.1407 and $1.3287, respectively, as rate differentials shifted in the dollar's favor.

"The dollar continues to show very good resilience to lower energy prices and a risk-friendly environment," ING foreign exchange strategist Francesco Pesole said in a note.

The U.S. currency's strength is another sign that Fed rate expectations are dominant, he said.

U.S. money markets on Wednesday assigned a 53% chance of the Fed delivering another 25 basis-point rate increase in October. A quarter-point hike was fully priced by December and more than three such increases were priced by September 2027, according to LSEG data.

Richmond Fed President Thomas Barkin on Tuesday suggested more rate rises were possible, saying there was a risk that current elevated levels of inflation could affect future prices. Fed officials Austan Goolsbee and Alberto Musalem also appeared to endorse the prospect of further interest-rate increases in comments earlier in the week.

"Momentum remains with the dollar even with crude oil declining and that's unlikely to change over the very short-term," MUFG Bank foreign exchange analyst Derek Halpenny said in a note.

Inflation risks remain elevated and there is likely an understandable level of skepticism over a potential deal to halt the Middle East conflict, he said.

-Write to Renae Dyer at renae.dyer@wsj.com

(END) Dow Jones Newswires

September 23, 2026 05:58 ET (09:58 GMT)