The US Dollar edged higher during Asian trading on Thursday after the Federal Reserve left interest rates unchanged, while Chair Kevin Warsh provided little guidance on how disagreements within the central bank's policy committee might be resolved.
The Dollar index, which tracks the greenback against a basket of six major currencies, rose 0.1% to 100.93 after reports that the United States had carried out air strikes in Iran.
Sterling slipped 0.2% to $1.3347 ahead of the Bank of England's interest rate announcement at 11:00 GMT, where markets widely expect policymakers to leave rates unchanged. Meanwhile, the Euro eased 0.1% to $1.1453.
The Australian Dollar was little changed at $0.6953, while the New Zealand Dollar gained 0.2% to trade at $0.5809. In addition, the Japanese Yen held steady at 163.465 against the US Dollar.
Geopolitical tensions helped the greenback recover from earlier losses after it had slipped to its weakest level since 20th July in the wake of the Federal Reserve's policy announcement.
Although three members of the Federal Open Market Committee voted in favour of raising interest rates in July, Warsh stopped short of signalling that another hike was imminent, maintaining the same cautious tone as in June.
That stance has begun to unsettle investors, as the Fed's reluctance to commit to further tightening has fuelled concerns over whether it can keep long-term inflation expectations under control, Reuters reports.
Treasury bonds came under heavy selling pressure following the Federal Reserve's policy decision, sending the 30-year Treasury yield to its highest level in nearly 20 years.
Fed funds futures now indicate a 34.9% probability that the Federal Reserve will leave interest rates unchanged at its next two-day policy meeting, which concludes on 16 September, up from a 24% likelihood before the latest decision, according to CME Group's FedWatch Tool.
“We continue to expect the Fed to remain on hold, but we have concerns that markets may react badly down the road to a perception that it is not moving when it should,” said Steve Englander, global head of G10 FX research at Standard Chartered in New York. “There was considerable commentary by market participants on the vagueness of his answers to questions that in the past would have been answered directly.”