Dollar Rebounds Amidst The Fed's Hawkish Stance

(RTTNews) - A hawkish pause delivered by the Federal Reserve helped the U.S. dollar stage a strong rebound during the week ended March 21. The week witnessed the U.S. Dollar strengthening against the euro, the British pound, the Australian dollar, as well as the Japanese yen.

The 6-currency Dollar Index which measures the U.S. Dollar's relative strength also recorded weekly gains of close to half a percent.

The Dollar Index, a measure of the Dollar's strength against a basket of 6 currencies rallied 0.36 percent during the week ended March 21 even as the Fed reiterated that it was in no hurry to cut interest rates. The Dollar Index jumped to 104.09, from 103.72 a week earlier. The index ranged between 103.20 recorded on Tuesday and 104.22 on Friday in a week that witnessed the Federal Reserve's rate review as well as release of quarterly economic projections.

The Fed lowered the GDP growth projection and raised the unemployment rate projection for 2025. Though the PCE inflation as well as its core component are both seen higher in 2025 than what the Fed had projected in December, the Fed expects the spike in inflation to be transitory. The Fed has therefore not revised its projection of the federal funds rate.

Warnings from the European Central Bank about the economic hit to Europe from the trade tariff war dampened sentiment heavily for the euro, resulting in a decline of 0.60 percent against the U.S. Dollar over the course of the past week. Concerns about growth as well as inflation dragged down the EUR/USD pair to 1.0814 on March 21, from 1.0879 a week earlier. The pair traded between a high of 1.0956 recorded on Tuesday and a low of 1.0797 recorded on Friday.

The GBP/USD pair dropped 0.11 percent during the week ended March 21 even as policy makers at Bank of England held rates steady as widely expected. The pair finished trading at 1.2918, on Friday, versus 1.2932 a week earlier. The week's trading ranged between Thursday's high of 1.3017 and Friday's low of 1.2886.

The Australian Dollar plunged almost a percent against the U.S. Dollar during the week ended March 21 amidst renewed concerns about the impact of steep tariffs by the U.S. From the level of 0.6323 on March 14, the AUD/USD pair slipped to 0.6269 by March 21, recording a decline of 0.85 percent. The weekly trading range was wider, between 0.6392 on Tuesday and 0.6258 on Friday.

The USD/JPY pair rallied 0.46 percent to 149.31 from 148.62 a week earlier even as Bank of Japan maintained rates at 0.5 percent as widely expected. The pair ranged between a high of 150.16 recorded on Wednesday and the low of 148.18 on Thursday.

Currency market moves during the current week are likely to be driven by geopolitical and trade dynamics as well as expectations surrounding a slew of economic data releases. The spotlight is invariably on the PCE-based inflation data due from the U.S. on Friday. Ahead of the key data update, the Dollar Index has fallen to 104.07.

The EUR/USD pair has increased to 1.0824 amidst a rebound in manufacturing PMI that partially offset the slowdown in the services PMI. The GBP/USD pair has also moved up to 1.2937 amidst a jump in non-manufacturing PMI that eclipsed the decline in manufacturing PMI. Ahead of Tuesday's CPI data release, the AUD/USD pair has risen to 0.6287. The USD/JPY pair has also in the meanwhile climbed to 149.79.