Greenback climbs to 19-month peak on Fed tightening bets; yen unsettled

what happened

The dollar rallied to its strongest level against major currencies in 19 months as investors increased their bets on further tightening by the Federal Reserve. Reuters reported that the trigger was October inflation in the US, which came in hotter than forecast, along with a run of hawkish remarks from Fed officials who flagged persistent price pressures and did not rule out a half-point move. Several brokers, Goldman Sachs among them, now expect one more hike early next year on top of a December increase.

The dollar index rose 0.11% to 102.98, its highest reading since April 2025. The euro slipped 0.08% to $1.108, its weakest since May last year, and sterling lost 0.16% to $1.3259. Against the yen the dollar edged down to 159.74 after a volatile session. Japan's top currency official, Atsushi Mimura, said it was still too early to ignore the summer's intervention, which pushed the pair lower during the day. Bank of Japan board member Toichiro Asada, meanwhile, argued against a near-term rate increase, and Reuters noted that many analysts expect the BOJ to hike as soon as next month.

The Australian dollar fell 0.15% toward a seven-month low, and New Zealand's kiwi dropped 0.18%.

why it matters

For currency traders, the key driver is the interest-rate gap: expectations of further Fed tightening support the dollar, while doubts about a quick BOJ hike keep the yen weak. The risk of Japanese intervention, however, could quickly change the picture for the dollar/yen pair.

market impact

Currencies: bets on more Fed hikes support the dollar and weigh on the euro and yen

• ▲US dollar (DXY) pressure up — expectations of further Fed tightening lift yields on dollar assets
• ▼Euro pressure down — a stronger dollar and hawkish Fed rhetoric pressure the European currency
• ↔Japanese yen mixed — rate differentials weigh on the yen, while intervention warnings limit its decline

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