News

Dollar Steady as Investors Brace for Fed Decisions Amid War

Shivangi

Apr 29, 2026 3:48 PM IST

Category News

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Synopsis

The consumer price index in Australia jumped by 1.4% during the first quarter of 2026, the largest quarterly increase since late 2023, and annual inflation soared to 4.1%. The Iran war and closure of the Strait of Hormuz moved energy prices upward with maximum price jumps in March alone hitting nearly 33% on month for fuel. Core inflation climbed to 3.5% year on year, with the RBA’s target of between 2 and 3 per cent.targeted by the RBA Markets are now pricing a 76% probability of a third RBA rate hike in May. Treasurer Jim Chalmers said the worst was yet to come as the oil shock rippled through the wider economy.

Currency markets hardly moved at all as traders avoided too much action ahead of the US Federal Reserve decision on rates later today. Everyone is watching Jerome Powell, not just what he does with rates but whether he stays or goes as Fed chair.

Key Highlights

• The US dollar index was stable at 98.57.
• The Fed is widely expected to keep rates on hold today, but it’s the near-term outlook for Powell and the economic impacts of war that are holding attention.
• The euro traded at $1.1716 and was firm around $1.3523, both backed down from highs hit earlier this month
• The yen traded at 159.55 per dollar.
• The Aussie was still near a four-year peak of US$0.7187 before local inflation data due later on Wednesday.

All Eyes on The Fed,  And What Powell Does Next

Currency markets are treading water ahead of a decision by the Federal Reserve on rates, due later Wednesday, widely expected to be held. The meeting is probably the last for Fed chair Jerome Powell as his term expires very soon. “The real question is going to be if he resigns after his term as chair or continues as a governor,” CBA currency strategist Carol Kong said. “Powell has made remarks that he would remain in position if he believes the independence of the Fed is challenged,’ she said, which simply means it will be up to him to assess how much political pressure the central bank is facing. The very uncertainty of that is making the markets cautious.

Iran War Talks Stalemated, Dollar Remains Underpinned

Geopolitically, the drive to bring an end to the Iran war runs into another wall. On Monday Trump dismissed Iran’s new peace deal, where US hostility issues such as the nuclear issue had to be resolved first. At this point, there is no deal on the horizon and the Strait of Hormuz remains practically closed with buy-stops keeping the dollar soft in support. The dollar held at 98.57 against a basket of currencies. With the mood in markets still fragile, both the euro and sterling traded further away from the highs reached earlier this month.

The Yen Is Stepping Away From Intervention, Japan Is Watching

The Japanese yen hovers dangerously close to 160 per dollar, a threshold that many analysts consider the tipping point where the Japanese government will step into currency markets. The yen was at 159.55, holding steady after the BoJ kept rates unchanged on Tuesday while signalling that a hike is likely in the coming months. 

At the same time, BOJ Governor Kazuo Ueda said the bank is prepared to increase rates if any economic slowdown from the Middle East remains moderate and the oil shock feeds broader inflation. Japan’s Finance Minister has already said authorities would be ready to intervene 24 hours a day if moves in the currency become disorderly.

Australian Dollar Near Four-Year High, Inflation Data Ahead Today

The Aussie dollar was steady near a four-year peak at US$0.7187 ahead of domestic inflation data due later Wednesday. The result will be highly scrutinised, the RBA has hiked twice this year already, with markets pricing in another rise in May. 

An inflation print today will therefore be higher than planned or else push the Australian dollar higher. The New Zealand dollar also rose marginally to US$0.5888. The Bank of Canada makes a rate decision today as well, with its dollar dipping to C$1.3676 in front of that announcement.

FAQs

1. Is it rate hike day from the Fed today? 

No, the Fed is expected to keep rates where they are. What matters is its evaluation of the economic consequences of the Iran war and Powell’s future as chairman.

2. How close is the yen to intervention? 

The yen now at 159.55 is close to a closely watched level of 160 per dollar which in the past has prompted Japanese government intervention to shore up the currency. Japan’s Finance Minister said authorities were on alert.

4. Why is the AUD near a year high? 

Australian dollar assets, for example, remain relatively attractive to global investors with the RBA having raised rates twice already this year and markets expecting more hikes.

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