U.S. dollar stays strong as markets price In another Fed hike

On Tuesday, September 22, 2026, the U.S. Dollar index traded above 100.5, near its highest level since July. The dollar's strength has been largely supported by the Fed's recent decision to raise interest rates by 25 basis points to 3.75%-4.00%. It marked the first increase since July 2023 and came amid persistent inflation, an oil shock fueled by renewed U.S.-Iran tensions, and stronger economic data.Alongside the hike, the Fed signaled that the fight against inflation is far from over. The market is pricing in another rate increase in October, with the probability rising from 43.5% a week ago to 56%. Expectations of higher rates are providing further support to the dollar, making dollar deposits and short-term U.S. Treasuries comparatively more attractive to investors.Currency markets react to higher rate expectationsAgainst this backdrop, USDJPY traded around 157.50, keeping traders alert to possible intervention to support the yen.