U.S. Dollar Dips as Markets Await Fed Rate Decision, BoJ Hikes Rates

The U.S. dollar declined on June 16 for a fourth consecutive session, with the dollar index (DXY) falling 0.1% to 99.56. Investor risk appetite improved amid expectations of a U.S.-Iran peace agreement and ahead of the Federal Reserve's interest rate decision. Markets widely anticipate the Federal Open Market Committee will maintain interest rates on June 17, focusing on updated economic projections and commentary from new Chairman Kevin Warsh. Meanwhile, the Bank of Japan raised its short-term policy rate by 25 basis points to 1.0% on June 16, its highest level in 31 years, pushing USD/JPY to 160.47. Geopolitical factors also played a role, with the U.S. and Iran scheduled to sign a cooperation memorandum on June 19 in Switzerland, which includes the full reopening of the Strait of Hormuz.