The dollar index held below 101 on Thursday after a sharp decline in the previous session, as the Federal Reserve left interest rates unchanged despite mounting inflationary risks stemming from renewed conflict in the Middle East. Still, three FOMC members dissented in favor of a rate hike, while Chair Kevin Warsh stressed that the decision to hold rates steady should not be viewed as a sign of policy inertia, adding that markets would continue to respond to incoming economic data.
In the Middle East, the US was reportedly carrying out fresh air strikes on Iran following attacks on American forces in the region.
Meanwhile, both sides remained unable to reach a potential agreement as Tehran insisted on maintaining control of the Strait of Hormuz, leaving traders concerned about inflation and the interest rate outlook.
Elsewhere, the Bank of England and the Bank of Japan are also widely expected to keep interest rates unchanged this week.