Dollar holds firm as Fed officials back tighter policy

What happened

Boston Federal Reserve President Susan Collins said on Tuesday that she supported last week's interest-rate hike and sees a somewhat more restrictive policy stance as appropriate to bring inflation sustainably back to the Fed's 2% target. The dollar has stayed on a solid footing since the hawkish decision, even as oil prices fell and risk sentiment improved. ING also pointed to hawkish remarks from Fed officials Austan Goolsbee and Alberto Musalem.

Why it matters

Between meetings, speeches by Fed officials are how markets learn where rates are heading. When several of them lean toward tighter policy, investors expect US rates to stay higher for longer, which makes dollar assets more attractive and supports the currency. A firmer dollar usually weighs on gold and on other major currencies, which is why the dollar has held up even on days when other risks eased.

What to watch

More Fed speakers through the week, the September US inflation data, and EUR/USD, which MUFG notes is near the bottom of its 1.1400 to 1.1800 range.