The dollar surged the most in over three months on Wednesday after Federal Reserve officials indicated growing support for interest-rate hikes this year. The Bloomberg Dollar Spot Index jumped 0.7%, its strongest performance since early March, while the pound and euro posted steep losses. Fed policymakers kept borrowing costs steady but economic projections showed nine governors now expect at least one quarter-point increase in 2025.

Money markets rapidly repriced expectations, with roughly 40 basis points of monetary easing now priced in by December versus about 20 basis points earlier. The policy-sensitive two-year Treasury yield climbed to 4.18%. Meanwhile, the yen weakened past the 160-per-dollar threshold to its cheapest level since July 2024.

Speculators held $27.8 billion in bullish dollar positions as of June 9, the highest level since February 2025. New Fed Chairman Kevin Warsh oversaw what analysts called a dramatic hawkish shift in the central bank's reaction function. The dollar's year-to-date gain of nearly 1% follows an 8% drop in 2025.

With global currency volatility sitting near six-year lows, Wednesday's meeting may unleash turbulence that markets haven't seen in recent weeks. Traders are now positioning for the possibility that the Fed could prove even more hawkish than current pricing suggests.