Dollar Strengthens as Traders Bet on Further Fed Rate Hikes

what happened

The greenback kept climbing against major peers during Thursday's Asian trading. Traders increasingly expect the Federal Reserve to lift borrowing costs again, a view reinforced by hot October consumer price figures and hawkish comments from several FOMC voters, according to TradingView's report based on RTTNews.

Fed Governor Christopher Waller said a half-point increase in December could be warranted, while Dallas Fed chief Lorie Logan backed at least two more quarter-point moves. CME FedWatch data show a quarter-point hike next month is fully priced, with an 11% chance of a 50-basis-point step.

Safe-haven buying has also lent support to the currency amid the US-Iran standoff in the Strait of Hormuz. Iran reportedly struck navigation equipment on Oman's Didamar island, while American forces hit Qeshm Island. Deputy armed forces chief Kioumars Heidari, speaking for Tehran, said the canal stays shut until the supreme leader orders otherwise.

Against the euro the dollar touched 1.1066, roughly a 1.5-year peak, down from 1.1090 a day earlier. Versus sterling it reached 1.3250, a four-week high. The yen weakened to 159.88 and the franc to 0.8337. Against the Australian, New Zealand and Canadian dollars, readings hit 0.6823, 0.5544 and 1.4265 respectively.

why it matters

For markets, the story centres on expectations of tighter Fed policy, which lift US yields and make low-yielding currencies less attractive. Geopolitical risk around Hormuz adds to demand for the greenback. Data due in the New York session include jobless claims, existing home sales, EIA crude inventories and the October budget statement.

market impact

Euro, yen, sterling: pressure from a stronger dollar as Fed rate-hike expectations build

• ▲US dollar pressure up — higher Fed rate expectations lift dollar yields
• ▼EUR/USD pressure down — a firmer dollar weighs on the euro pair
• ▼GBP/USD pressure down — safe-haven demand for the dollar pressures sterling

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