Dollar rises to 19-month high as Fed hike bets grow, yen softens

The dollar climbed to a 19-month high against major peers on Thursday, supported by growing expectations of a Federal Reserve rate hike, while the yen edged toward the key 160-per-dollar level following a dovish central banker’s speech.

Traders ramped up bets on further Fed tightening after stronger-than-expected October inflation data and a series of hawkish remarks from US central bank officials, who expressed concern over stubborn inflation and left open the possibility of a larger 50-basis-point increase.

Some major brokerages, including Goldman Sachs, now expect another hike early next year, in addition to one in December.

The dollar index, which measures the greenback against a basket of currencies, rose by 0.15% to 103.02, the highest since April 2025.

New York Fed President John Williams is set to appear on a panel late Thursday that will be closely watched given his “pre-October FOMC meeting views the Fed had time on rate hikes,” said Gavin Friend, senior markets strategist at National Australia Bank, in a note.

“Fast forward two weeks and following a hotter-than-forecast October CPI report, Fed officials appear to be falling over themselves to talk up rate hikes,” Friend said. “Any guidance from Williams will be seized on.”

Against the Japanese yen, the dollar reversed an earlier decline to trade 0.04% higher at 159.83, underpinned by wide interest-rate differentials as traders increased bets on further Fed hikes. It hit a more than two-month high earlier on Thursday.

Bank of Japan board member Toichiro Asada, one of two dovish policymakers who dissented from September’s decision to increase borrowing costs to 1.25%, pushed back against calls within the board for a near-term interest rate hike, saying in a speech that premature rate hikes could hurt growth and push down underlying inflation.

Earlier a warning from Japan’s top currency diplomat Atsushi Mimura that it was “too early to forget” intervention by Japanese authorities during the summer pushed the dollar/yen pair to its lowest point of the day but the respite for the yen was brief.

“Once dollar/yen rises above 160, I think caution will increase another notch,” said Sho Suzuki, market analyst at Matsui Securities.

“For it to move higher from there, the dollar would need to strengthen further, for example, through a further rise in expectations for Fed rate hikes, or a drop-off in expectations for BOJ rate hikes. Without something like that, the pair may lack enough momentum to test a break above 160,” he said.

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% in the year to October, up from a 6.8% annual increase in September.

The euro was up 0.06% against the US dollar at US$1.1096 while sterling slipped 0.1% to US$1.3266.

The Australian dollar was little changed versus the greenback at US$0.6847, while New Zealand’s kiwi was down 0.05% at US$0.5559.

In cryptocurrencies, bitcoin fell 0.63% to US$73,848.24. Ether declined 0.49% to US$2,058.18.

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