DXY Flat Near 99.9 as Hawkish Fed Hike Outweighs a Hiking BoJ

The US Dollar Index sits at 99.9240, essentially flat on the day (-0.02%). The reading caps a week in which the Fed delivered its first rate hike since 2023, lifting the target range 25bp to 3.75%-4.00% in a 12-0 vote on September 16, with 16 of 18 officials' dot-plot projections pointing to a further hike this year. That hawkish guidance has kept the dollar broadly supported even as the ECB, BoE and BoJ all made their own policy moves this week. Equities were little changed (S&P 500 -0.07%, Dow -0.33%, Nasdaq -0.03%) and the VIX eased to 15.26 (-1.17%), with no acute risk-off despite firmer Treasury yields.

The Fed's September 16 statement described inflation as still elevated, and its 12-0 vote lifted the target range to 3.75%-4.00% — the first hike since 2023. The dot plot showed 16 of 18 officials expecting another increase before year-end. Treasury yields edged up on the day, per Yahoo reference figures: the 10-year added 5.5bp to 5.002%, the 5-year rose 5.5bp to 4.856%, the 30-year gained 3.9bp to 5.335%, and the 3-month ticked up 1.7bp to 3.982% — modest moves across the curve rather than a repricing. Separately, an afr.com headline noted that remarks from Warsh rattled markets, part of a broadly hawkish tone this week, though no further Fed decision details beyond September 16 were confirmed.

EUR/USD trades at 1.1481 (+0.04%) after Friday's session pushed it just below $1.15 — its weakest level since late July — down about 1% on the week following the ECB's September 10 hike and the more hawkish Fed. GBP/USD is at 1.3389 (+0.23%), having closed Friday near 1.3358, its softest since late July, after the Fed hike met a dovish 6-3 BoE hold, though an August UK retail sales beat (+0.5% m/m versus a forecast -0.2%) cushioned the drop. USD/JPY sits at 156.67 (+0.46%) — more below. USD/CAD trades at 1.3995 (+0.03%), having ended Friday near 1.4000 as the Fed-BoC rate gap widened and a third straight drop in WTI crude removed a usual prop for the loonie.

USD/JPY trades at 156.67 (+0.46%), still building on Friday's BoJ-driven session. The Policy Board hiked the overnight call rate 25bp to around 1.25% — a 31-year high — on a 7-2 vote, with dissenters Toichiro Asada and Ayano Sato preferring to hold at 1.00%. Two hikers, Hajime Takata and Naoki Tamura, separately objected that the BoJ's inflation-outlook language was too cautious. Those dovish cross-currents, not the hike itself, drove the yen lower, even as Governor Kazuo Ueda's own remarks were read as hawkish. Vice Finance Minister for International Affairs Atsushi Mimura has said he is "neither satisfied nor reassured" by yen moves and that Japan "remains on high alert," but no new intervention has been confirmed. Japan enters Silver Week, closed Monday and Wednesday, thinning liquidity into midweek.

The only scheduled item on today's calendar is a low-importance EU ECOFIN meeting at 20:15, with no forecast or previous figure given. Japan is now in Silver Week: markets are closed Monday, September 21 (Respect for the Aged Day) and Wednesday, September 23 (Autumnal Equinox Day), with Tuesday, September 22 a citizens' holiday, leaving no BoJ events and thin yen liquidity through midweek. Later in the week: HCOB/S&P Global flash eurozone and Germany PMIs and the UK's S&P Global/CIPS flash PMIs, both due Wednesday, September 23; and Canada's July retail sales at 8:30am Thursday, September 24.