Dollar holds steady as markets await Warsh’s first Fed verdict

The US dollar edged lower on Wednesday as investors awaited the Federal Reserve’s first policy decision under Chair Kevin Warsh, while optimism surrounding an interim peace agreement between the United States and Iran helped improve market sentiment.

Currency markets remained largely subdued during the Asian trading session, with traders reluctant to take significant positions ahead of the Federal Reserve’s interest rate announcement later in the day.

The euro held steady at $1.1613, while the British pound was little changed at $1.3431.

Focus on Fed's first meeting under Warsh

Market participants widely expect the Federal Reserve to leave interest rates unchanged at Warsh’s first policy meeting as chair.

However, investors are expected to closely examine the central bank’s policy statement, economic projections, and Warsh’s press conference for indications about the future direction of monetary policy.

The new Fed Chair may still be gauging the mood of the committee that he has to carry to deliver successful policy.

Against a basket of currencies, the dollar eased to 99.50, giving back some of the safe-haven gains recorded earlier as more details emerged regarding the interim agreement between the United States and Iran aimed at ending the conflict in the Middle East.

Yen remains near the intervention watch zone

The Japanese yen showed little benefit from the softer dollar and remained under pressure at 160.27 per dollar.

The currency continued to trade at levels closely monitored by market participants for possible intervention by Japanese authorities.

On Tuesday, the Bank of Japan raised interest rates to their highest level in 31 years, marking another significant step in the central bank’s policy normalisation efforts.

Policymakers also signalled their willingness to tighten policy further as they seek to contain price pressures linked to the energy shock caused by the regional conflict.

However, the central bank provided limited guidance regarding the timing of any future rate increases.

Elsewhere, the Australian dollar traded at $0.7063.

The Reserve Bank of Australia kept its cash rate unchanged at 4.35% on Tuesday, citing slowing economic activity while also warning that further tightening remains possible if inflation pressures persist.

The New Zealand dollar fell 0.12% to $0.5825.

Gold extends rally as inflation concerns ease

Gold prices advanced for a fifth consecutive session, supported by declining oil prices and hopes that a US-Iran peace agreement could reduce inflationary pressures stemming from energy markets.

Spot bullion traded near a one-week high as investors assessed the possibility of Iranian oil returning to global markets.

However, gains remained measured as uncertainty persists over the final terms and implementation of the agreement.

Investors are also awaiting guidance from Warsh's first meeting as Federal Reserve chair, with expectations that his comments on inflation and future interest-rate risks could influence the outlook for precious metals.

Silver gains for fifth straight session

Silver also extended its rally for a fifth consecutive session.

Spot silver traded around $70.40 an ounce during Asian trading hours, continuing its recovery after a sharp decline in crude oil prices.

Market participants viewed the emerging US-Iran peace framework as a factor that could reshape expectations for inflation and interest rates.

Lower energy prices have eased concerns that Middle East tensions would continue driving inflation higher.

At the same time, investors remain focused on the Federal Reserve meeting, looking for indications on whether the central bank will adopt a less aggressive policy stance in the months ahead.

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