The dollar is poised for its best weekly performance in three months after the US central bank signaled more interest-rate hikes are to come. The Bloomberg Dollar Spot Index is up about 1.1% this week, powered by solid US economic growth and the Federal Reserve’s anti-inflation message after raising interest rates for the first time in more than three years. The decision removed the biggest impediment to a stronger dollar, according to JPMorgan, Standard Chartered Bank and Brown Brothers Harriman.

The dollar gauge consolidated around its 200-day moving average before inching above the key level on Friday. Historically, a daily close above the moving average has ushered in more gains, as seen in March and June. The index pared a weekly gain that would have been the biggest rally since the outbreak of the Iran War in March, as the yen trimmed declines amid a report of a Bank of Japan rate check.

“The quarter-point hike seems to have removed one of the market’s major deterrents to buying the dollar — namely the fear that Chairman Warsh would not raise rates in defiance of President Trump,” said Steve Englander, co-head of FX Research ex-China at Standard Chartered Bank in New York. “We now see a clear path to dollar strength with 10-year Treasury yields rising to 5.5% over the next 12 months.”

Speculative currency traders have been reducing bullish greenback wagers for a sixth straight week, per CFTC data. Still, some remain cautious. “Tightening by other major central banks limits policy divergence and suggests the dollar is unlikely to make new cyclical highs,” said Elias Haddad, global head of markets strategy at Brown Brothers Harriman in London. The dollar gauge trades about 1.9% below its 2026 peak reached on June 24. According to JPMorgan currency analyst Pat Locke, the greenback was undervalued by about 2%-4% prior to this week’s Fed meeting.