• DXY remains on the defensive in the absence of a more hawkish tilt in the FOMC Minutes.
• However, traders are still pricing in a greater chance of a Fed rate hike later this year.
• Renewed US-Iran hostilities further support the safe-haven buck and help limit losses.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, trades with a negative bias for the second straight day, though it remains confined within the previous day's range through the Asian session on Thursday. The index is currently placed just below the 101.00 mark, down just 0.10% for the day.

The US Dollar (USD) bulls seem hesitant in the absence of a notable hawkish shift in the FOMC Minutes, though bets for a rate hike in 2026 and geopolitical uncertainties act as a tailwind for the index. The Minutes from the June 16–17 FOMC meeting, released on Wednesday, revealed that policymakers were divided with regard to the direction of interest rates. The minutes further stated that many participants indicated the appropriate level of the fed funds rate would be within or slightly below the current target range at the end of this year.

Fed officials, however, noted that the upside risk to inflation remains elevated and indicated that some policy tightening would likely be warranted to return inflation to 2%. Moreover, traders are still pricing in around a 70% chance that the US central bank will raise borrowing costs by 25 basis points (bps) in September. Moreover, a fresh escalation of tensions between the US and Iran triggered a sharp rally in Oil prices, reviving inflation fears and reaffirming hawkish Fed bets. This, in turn, backs the case for the emergence of some USD dip-buying.

The US military launched a new wave of strikes against Iran in retaliation for Tehran’s attacks on commercial ships in the Strait of Hormuz. Iran responded by continuously targeting US military installations and assets across Bahrain and Kuwait. Adding to this, US President Donald Trump said on Wednesday that the memorandum of understanding aimed at ending the conflict in the Middle East is now over. This warrants some caution before placing aggressive bearish bets as traders now look to US Weekly Jobless Claims for a fresh impetus.