NEW YORK: The dollar rose against major currencies on Thursday, climbing to its highest level in about 19 months as investors pushed Treasury yields higher following a hawkish reassessment of the Federal Reserve’s interest-rate path.
Fed officials this week warned that inflation remains stubbornly elevated, with some signaling openness to a 50-basis-point rate increase if price pressures fail to ease. Strong US inflation data released on Tuesday reinforced that view, prompting traders to raise expectations for further policy tightening.
The euro dropped 0.28 percent to USD1.10585, hitting its lowest level against the dollar since April 2025.
The dollar was last up 0.14 percent to 0.834 against the Swiss franc, reaching a one-month high.
“The dollar has strengthened almost exclusively based on Fed expectations,” said Eugene Epstein, head of trading and structured products at Moneycorp. “If you look at Fed funds futures, the correlation is quite high in the last couple of days with the move in the dollar. And Fed funds futures themselves are high because (a) CPI was stronger than expected and (b) there’s been a fair amount of hawkish comments from numerous Fed speakers.”
Investors are now pricing in a 91 percent chance of a December Fed rate hike, according to the CME’s FedWatch tool. The yield on the 2-year note, which typically moves in step with Fed rate expectations, was last up 10.79 basis points to 4.835 percent. The yield on benchmark US 10-year notes was last up 7.94 basis points to 5.068 percent.
Some brokerages, including Goldman Sachs, now expect another hike early next year, in addition to one in December. New York Fed President John Williams is due to appear on a panel late on Thursday.
The dollar index, which measures the greenback against a basket of currencies, was last up 0.3 percent at 103.16, remaining at its highest since April 2025.
Japan’s top currency diplomat, Atsushi Mimura, warned market participants on Thursday that it is “too early to forget” this summer’s intervention as the yen again edged towards the key level of 160 to the dollar.
Many analysts in a Reuters poll expect the next BOJ rate hike as soon as next month. That view was strengthened on Thursday by data that showed Japan’s annual wholesale inflation re-accelerated to 7.1 percent in the year to October, from 6.8 percent in September.
The Japanese yen weakened 0.13 percent against the greenback to 159.975 per dollar, dropping to its lowest level since September.
The Australian dollar weakened 0.58 percent against the greenback to USD0.6808, hitting its lowest level since January, while New Zealand’s kiwi lost 0.25 percent to USD0.5548.
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