The dollar climbed to a 19-month high against major currencies on Thursday, buoyed by growing expectations that the Federal Reserve will raise interest rates again. Meanwhile, the yen moved toward the key 160-per-dollar level after a speech by a dovish Bank of Japan policymaker.
Traders increased their bets on further Fed tightening after October inflation data came in stronger than expected, along with a series of hawkish comments from US central bank officials. Those officials voiced concern about stubborn inflation and did not rule out a larger 50-basis-point increase. Goldman Sachs and some other major brokerages now expect another hike early next year, in addition to one in December.
Dollar index reaches highest level since April 2025
The dollar index, which measures the greenback against a basket of currencies, rose 0.15% to 103.02. That was its highest level since April 2025. Attention now turns to New York Fed President John Williams, who is scheduled to appear on a panel late Thursday.
Gavin Friend, senior markets strategist at National Australia Bank, said in a note that the Fed had seemed to have time on rate hikes before the October policy meeting. Following a hotter-than-forecast October consumer price report, he said, Fed officials appeared eager to talk up rate increases, and any guidance from Williams would be closely scrutinised.
Yen nears 160 as intervention warning fades
Against the yen, the dollar reversed an earlier decline to trade 0.04% higher at 159.83, after touching a more than two-month high earlier in the day. Wide interest-rate gaps and rising bets on further Fed hikes supported the greenback.
Earlier, Japan’s top currency diplomat, Atsushi Mimura, warned that it was too early to forget intervention by Japanese authorities during the summer. That warning briefly pushed the dollar/yen pair to its lowest point of the day, but the yen’s gains did not last.
Bank of Japan board member Toichiro Asada, one of two dovish policymakers who dissented from September’s decision to lift borrowing costs to 1.25%, pushed back against calls for a near-term rate increase. In a speech, he said premature hikes could hurt growth and push down underlying inflation.
Sho Suzuki, market analyst at Matsui Securities, said caution would grow once dollar/yen rises above 160. He said the pair would need more dollar strength, such as rising expectations of Fed hikes or fading expectations of BOJ hikes, to move higher.
Japan wholesale inflation and wider currency moves
Many analysts in a poll expect the Bank of Japan to raise rates as soon as next month. That view was strengthened on Thursday by data showing Japan’s annual wholesale inflation accelerated to 7.1% in the year to October, up from 6.8% in September.
Elsewhere, the euro gained 0.06% against the dollar to $1.1096, while sterling slipped 0.1% to $1.3266. The Australian dollar was little changed at $0.6847, and New Zealand’s kiwi fell 0.05% to $0.5559.
In cryptocurrencies, bitcoin dropped 0.63% to $73,848.24, while ether declined 0.49% to $2,058.18.
