The dollar strengthens after the Fed keeps interest rates unchanged.

The U.S. dollar rose against major currencies on Wednesday, recovering losses from the previous two sessions after the Federal Reserve decided to keep interest rates unchanged.

The Fed signaled expectations of higher inflation and projected just one rate cut this year, as policymakers assessed the economic effects of the ongoing conflict involving the U.S., Israel, and Iran.

Since tensions in the Middle East escalated nearly three weeks ago, the dollar has generally strengthened, hitting a 10-month high late last week as investors sought safety in U.S. assets amid rising oil prices.

Karl Schamotta of Corpay noted that the Fed’s latest outlook—featuring slower growth, weaker employment, and higher inflation—suggests that rising energy costs may temporarily weigh on economic demand.

In currency markets, the dollar climbed 0.92% against the Swiss franc, while the euro fell 0.5% to $1.148. Analysts say the Fed’s decision reinforced a “hawkish hold,” supporting the dollar as Treasury yields remain elevated despite unchanged rate projections.

The dollar index gained 0.51% to 100.0. Fed Chair Jerome Powell added that the central bank may look past oil-driven inflation pressures if progress continues in reducing core inflation.

Earlier data showed U.S. producer prices rose 0.7%, surprising expectations.

Meanwhile, attention is turning to upcoming decisions from other major central banks, including the ECB, Bank of England, and Bank of Japan, all expected to keep rates steady while monitoring inflation risks linked to the Middle East conflict.

The Japanese yen weakened toward levels that could trigger intervention, while the British pound also declined. The dollar also edged higher against the offshore Chinese yuan.

Sources: Reuters