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- US Dollar Index trades with mild gains around 98.15 in Friday’s Asian session.
- Fed held its key policy rate steady at its April meeting, as widely expected.
- US GDP grew at an annualized rate of 2.0% in Q1 2026, weaker than expected.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 98.15 during the Asian trading hours on Friday. The DXY posts modest gains on a hawkish hold from the US Federal Reserve (Fed). Traders brace for the US ISM Manufacturing Purchasing Managers Index (PMI) for April, which is due later on Friday.
As widely expected, the US central bank held the federal funds rate steady at 3.5% to 3.75% at its April meeting on Wednesday, marking a third straight pause. Fed Chair Jerome Powell said during the press conference that the economic outlook remained highly uncertain and that the Middle East conflict had contributed to that uncertainty.
Powell further stated that the committee felt like it was in a “good place” to either move towards rate cuts or rate hikes, depending upon how the impact from surging oil prices plays out. Hawkish remarks from Fed officials could lift the US Dollar against its rivals in the near term.
Furthermore, ongoing tensions in the Middle East and the closure of the Strait of Hormuz could boost a safe-haven asset such as the US Dollar. Earlier on Thursday, US President Donald Trump said he was sticking with a naval blockade of Iranian ports amid concerns the vital Strait of Hormuz would not reopen anytime soon.
Meanwhile, Iranian President Masoud Pezeshkian stated that he considered the US naval blockade an “extension of military operations” and that it was “intolerable.”
Nonetheless, the downbeat US economic data might cap the upside for the DXY. Data released by the Bureau of Economic Analysis (BEA) on Thursday showed that the US economy expanded at an annualised rate of 2.0% in the first quarter of 2026 (Q1). This figure followed a 0.5% expansion in the previous reading but came in weaker than the expectation of 2.3% growth.
