Fed Hikes Rates by 25bps, Pressures Canadian Dollar and Other Currencies

The Federal Reserve raised its benchmark interest rate by 25 basis points to a range of 3.75-4.00%, marking its first increase since July 2023, according to CoinDesk. This move, the first rate adjustment since a cut in December 2025, strengthened the US Dollar and led to a decline in several major currencies.

Following the Fed's hike, USD/CAD climbed 71 pips or 0.51% to just below 1.4000, as reported by FX Street, with the Bank of Canada holding rates steady. This widened the rate differential between the US and Canada from 1.375 to 1.625 points. Other currencies also weakened, with the Australian Dollar sliding over 20 pips to 0.7093, the Pound falling 91 pips to just under 1.3400, and the Euro trading near 1.1500. The Dollar Index surged past the 100.00 mark, reflecting broad dollar strength.

WTI crude oil prices dropped about 3.3% to around $97.50 per barrel on the day. For Japanese investors, the Fed’s hawkish stance and a firmer dollar may impact FX and equity positioning, especially given Japan’s sensitivity to USD/JPY movements and commodity prices amid summer trading.