The US Dollar rallied on Wednesday from a two-and-a-half-month low as the minutes from the Fed’s last meeting indicated rates would potentially stay restrictive for some time.

The minutes revealed the Fed would proceed “carefully” and that “all participants judged it appropriate to maintain” the current rate setting.

Officials came to an agreement that they would only hike rates if the progress being made on curbing inflation weakened. This echoed recent comments from policymakers that left the door open for additional tightening, despite markets moving to price in rate cuts from early 2024, Reuters reports.

“Almost four rate cuts are fully priced for next year and that looks very aggressive,” according to Niels Christensen, chief analyst at Nordea.

“That said, it's not unusual for the Fed to cut by 50 basis points when they start cutting, so it could be possible,” he continued.

The US Dollar index – measuring the currency against major peers – gained 0.2% to 103.78 at the time of writing, moving away from its lowest level since the end of August of 103.17 reached on Tuesday.

Elsewhere, the Euro was trading at $1.0894 on Wednesday after edging up to $1.09655 the day before, its highest against the greenback since the middle of August.

Whereas Sterling lost 0.2% to $1.2518, not too far however from a two-month high of $1.2558 hit on Tuesday, ahead of the Chancellor’s Autumn Statement later on Wednesday.

“We think some looser fiscal policy will be welcomed by Sterling at this juncture,” stated ING strategist Chris Turner.

In Japan, the Yen was down 0.6% to 149.265 per Dollar, after reaching a two-month high of 147.155 on Tuesday.

The Yen has gained 1.6% against USD so far this month, but remains 12% down for the year.