The dollar index (DXY) increased by 0.51% on Wednesday, supported by stronger-than-expected U.S. producer prices for February, which rose by 0.7% month-over-month and 3.4% year-over-year, surpassing forecasts of 0.3% and 3.0%, respectively. The Federal Open Market Committee (FOMC) maintained the federal funds target range at 3.50%-3.75% and raised its 2026 U.S. GDP forecast from 2.3% to 2.4%.
The escalation of threats from Iran regarding attacks on energy infrastructure in Saudi Arabia, Qatar, and the UAE contributed to market volatility, lowering stock prices while raising demand for the dollar. The Fed’s hawkish stance led to the expectation of one 25 basis point rate cut this year, while swaps markets currently indicate a 0% probability of any cut during the upcoming April FOMC meeting. Meanwhile, the yen fell to a 20-month low against the dollar due to rising U.S. Treasury yields and increasing energy prices.
