FOREX-Dollar ascends to fresh 2-month high on inflation worry, Fed hike expectations

The dollar hit a fresh two-month high on Thursday as Treasury ‌yields ​rose and expectations of further Federal Reserve interest rate hikes strengthened after hawkish remarks from several central bank officials and solid economic data. Treasury yields continued to climb after sharp moves in the prior session, with the 30-year US bond yield at its highest since June 2004 and the benchmark 10-year ‌note at its highest in nearly two decades following economic data that indicated a jump in business activity along with mounting price pressures.

Data on Thursday showed weekly initial jobless claims dipped by 1,000 to 197,000, below the 201,000 estimate of economists polled by Reuters, indicating a steadying labor market. Adding to inflation concerns, oil prices were up almost 4% in choppy trading after a Houthi missile attack on Saudi Arabia revived supply disruption ‌fears, although gains eased on reports the US and Iran discussed reopening the Strait of Hormuz.

Since the central bank's rate hike of 25 basis points last week to the 3.75%-4.00% range, ‌several Federal Reserve officials have flagged the possibility of more rate increases if inflation does not moderate. "We've got the two-year at the top of a post-2008 range, and we've got the 30s that are 22-year high, and the ten-year at a 19-year high. I don't think FX traders need to know too much more than that," said Joseph Trevisani, senior analyst at FXStreet in New York.

"The Fed knows that this is a supply shock for oil, they're looking beyond that, one of the things ⁠they're looking ​at is the projected growth from the economy in ⁠the third quarter." The dollar index, which measures the greenback against a basket of currencies, was on track for a fourth straight daily advance as it rose 0.15% to 101.28 after hitting 101.39, its highest since July 29.

FED SPEAKERS KEEP DOOR OPEN ⁠TO HIKES Comments from several Fed officials on Thursday reinforced the need to combat inflation, with New York Federal Reserve President John Williams and Philadelphia Fed President Anna Paulson noting that more rate increases were likely needed.

Expectations for a ​rate hike of at least 25 basis points at the Fed's October meeting stood at 68.6%, up from 55.4% a week ago, according to CME FedWatch. EUROPEAN CURRENCIES UNDER PRESSURE

The euro ⁠was off 0.07% at $1.1372 after falling to $1.1358, its lowest since July 28. European Central Bank board member Isabel Schnabel resigned on Thursday to take on a senior role at the International Monetary Fund, kicking off a lengthy reshuffle atop Europe's most powerful ⁠financial ​institution. Norway's central bank raised interest rates on Thursday and Sweden's signaled it was likely to follow suit before the end of the year, as central bank policymakers around the world grapple with rising inflation from a war-driven energy shock.

Against the Norwegian crown,, the dollar strengthened 0.33% to 9.51 while the Swedish crown weakened 0.1% versus the dollar to 9.921. Against the Swiss franc, the dollar strengthened 0.34% to 0.828 ⁠after climbing to 0.8296, its highest since May 2025. The Swiss National Bank stood apart from other central banks by keeping its benchmark interest rate on hold and stating that rising inflation caused ⁠by war in the Middle East was not ⁠a threat to Swiss price stability.

The Japanese yen weakened 0.32% against the greenback to 158.82 per dollar after Japanese Finance Minister Satsuki Katayama said the principles underpinning the coordinated Japan-US currency intervention in July remain intact, but sentiment remained fragile after last week's Bank of Japan rate hike did not convince investors ‌that a faster tightening cycle is in ‌store.