Dollar Holds Near Monthly Peak as Traders Bet on More Fed Hikes

what happened

Reuters reports that early on Thursday the dollar stayed close to a one-month peak against major currencies. The dollar index rose 0.63% to 102.85, its strongest reading since October 14. Investors are adding to bets on further Fed tightening after hotter-than-expected October inflation data and hawkish comments from officials who did not rule out a 50-basis-point increase. Goldman Sachs, according to the report, now expects another hike early next year on top of the one it sees in December.

Against the yen the dollar eased 0.12% to 159.58, though wide interest-rate gaps keep it supported. The euro gained 0.09% to $1.1099 and sterling traded at $1.328, while bitcoin slipped 0.59% to $73,876.57. Attention now turns to a speech by Bank of Japan board member Toichiro Asada, and most analysts in a Reuters poll expect the BOJ to raise rates as soon as next month.

why it matters

The gap between Fed and Bank of Japan policy remains the key driver for markets: the tighter the American stance and the softer the Japanese one, the more pressure falls on the yen. Further Fed remarks and any signal from Tokyo are likely to set the tone for currency trading in the near term.

market impact

Dollar and yen: bets on more Fed hikes lift the dollar and weigh on the yen

• ▲Dollar index pressure up — rising bets on Fed rate hikes lift yields on dollar-denominated assets
• ▲USD/JPY pressure up — the wider rate gap between the US and Japan supports the dollar against the yen

tags

instruments

on polymarket